Apollo, Fortis, Max Healthcare, others rise up to 38% ytd: Should you Buy or sell the Hospital stocks?

Stock Market today: Apollo Hospitals Enterprise Ltd, Fortis Healthcare , Max Healthcare Institute share prices have seen handsome gains of 22-38% year to date and analysts remain positive on the prospects and the outlook.

The expansions being undertaken , the rising demand , indoor procedures, revival of foreign patients through pick up in medical tourism and capacity expansions are all considered as key drivers of growth

Growth outlook intact, say analysts

HSBC Securities and Capital Markets (India) Private has retained its positive view on the growth outlook for the hospital sector on intact structural drivers: an ageing population, rising lifestyle-related disorders, increasing healthcare insurance coverage, and rising income levels. They like hospitals with room to improve occupancy, average revenue per occupied bed (ARPOB), and payor mix. The top picks of HSBC from the companies it is covering include Apollo Hospitals Enterprise for a target price of ₹7,720, Aster DM Healthcare that a target price of ₹450) and Krishna Institute of Medical Sciences with a target price of ₹660

Firm Q2 expectations

Meanwhile during the July-September quarter, the earnings expectations remains strong. Delhi National Capital Region (NCR) saw heavy monsoon in 2Q with parts of Delhi under flood-like situation which analysts at Jefferies India Pvt Ltd believe will lead to healthy occupancy in the quarter. Jefferies expects high Earnings before Interest tax depreciation and amortisation growth for Apollo ( up 20% YoY) and Fortis (up 19% YoY) followed by Max (up11% YoY) while Medanta (up 4% YoY) could have another subdued quarter. Apollo Hospitals will likely be led by improving profitability in pharmacy and sustained high occupancy in hospitals. Fortis should benefit from higher occupancy and higher margin in hospitals.

The benefits from Delhi NCR rising occupancy is also to benefit Max Healthcare and existing bed capacities are likely to deliver healthy Ebitda growth. However expansions that accrue benefits in longer however see lower profitability initially as fixed costs remain high. In the backdrop analysts expect Dwarka startup cost to restrict consolidated Ebitda growth to low double digits.

Global Health Ltd popularly known as Medanta too may sees modest growth, which as per Jefferies will likely be due to year on year Ebitda decline in Lucknow hospitals.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions