Hospital Stocks Soar Up to 38% YTD: Should You Buy or Sell?

Shares of Apollo Hospitals, Fortis Healthcare, and Max Healthcare have gained between 22% and 38% this year, with analysts remaining optimistic about their future growth.

Key factors driving this growth include ongoing expansions, increased demand for medical procedures, a revival in medical tourism, and more hospital capacity.

Positive Growth Outlook

HSBC Securities maintains a positive outlook for the hospital sector, citing key growth drivers such as an aging population, rising lifestyle diseases, greater healthcare insurance coverage, and increasing income levels. They recommend stocks with room for improvement in occupancy rates and average revenue per occupied bed (ARPOB). HSBC’s top picks include Apollo Hospitals with a target price of ₹7,720, Aster DM Healthcare at ₹450, and Krishna Institute of Medical Sciences at ₹660.

Strong Q2 Earnings Expected

For the July-September quarter, earnings are projected to be strong. The heavy rains in the Delhi National Capital Region (NCR) are expected to lead to high hospital occupancy rates, according to analysts at Jefferies India. They forecast a 20% year-on-year growth in earnings before interest, tax, depreciation, and amortization (EBITDA) for Apollo, 19% for Fortis, and 11% for Max Healthcare. However, Medanta might see only a modest 4% growth due to ongoing challenges.

Analysts believe that Apollo will benefit from better profitability in its pharmacy business and sustained high occupancy rates, while Fortis is expected to profit from increased occupancy and margins. Max Healthcare is also likely to benefit from rising occupancy in Delhi NCR, contributing to solid EBITDA growth.

However, some expansions may initially lead to lower profitability due to high fixed costs. Jefferies expects Medanta to experience modest growth, mainly due to a decline in EBITDA at its Lucknow hospitals.