Our Terms & Conditions | Our Privacy Policy
India’s hospital stocks are expected to benefit from anticipated growth in healthcare spending, funds management firm JM Financial Asset Management Ltd noted. It said the next two decades will see a significant increase in the number of individuals reaching retirement age.
In yet another boost to the sector, Prime Minister Narendra Modi’s government approved an expansion of a free health insurance program for all citizens aged 70 and above. This should eventually lead to more formalization of healthcare services, which would be good for the sector.
Per a report by Indian Brand Equity Foundation (IBEF), India’s hospital market was valued at approximately ₹8.37 trillion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 8.0% from 2024 to 2032.
Some of the industry’s largest players—Max Healthcare Institute Ltd and Apollo Hospitals Enterprise Ltd—have seen stock price gains of 43% and 26%, respectively, in 2024 so far. This momentum is expected to persist as increased insurance coverage offers hospitals further motivation to expand in a country that has only 1.3 hospital beds per 1,000 people.
Let’s take a look at three stocks that are potentially poised to make the most of this tailwind the sector is benefiting from.
Max Healthcare Institute
With a market cap of ₹99,125 crore, Max Healthcare stock has returned approximately 47.5% to shareholders in the past one year.
Max Healthcare Institute Share Price Return: 1 year
View Full Image
Source: Screener.in
Max Healthcare, the second largest hospital network in India, is primarily involved in delivering healthcare services through primary care clinics and multi-specialty hospitals.
As of 2024, Max Healthcare has a total of 19 hospitals and a capacity of 4,000 beds, primarily concentrated around Delhi-NCR. In Q4FY24, Max Healthcare completed two major M&A transactions, increasing its capacity by about 750 beds. In September 2024, the hospital signed a strategic partnership with the Lakshdeep Group to acquire a 64% stake in Jaypee Healthcare (JHL).
The deal includes acquisition of two operational hospitals: the 500-bed Jaypee Hospital in Noida and the 200-bed Jaypee Hospital in Bulandshahr. This acquisition is expected to strengthen Max Healthcare’s footprint in the National Capital Region (NCR) of Delhi.
For FY24, total revenues came at ₹5,584 crore, a growth of 18.8% over the previous year. Profit before tax (PBT) for the fiscal amounted to ₹1,365 crore, which was a solid 28.4% higher than the previous year. The operating margin for FY24 was 27.8%, slightly up from 27.7% in FY23. The hospital reported an average revenue per occupied bed (ARPOB) of ₹76,000 per bed per day, an increase of 12% from FY23. These numbers highlight the company’s robust operational efficiency and its capacity for significant long-term revenue growth.
With a trailing price-to-earnings multiple of 93.6x, the stock trades at a premium.
Apollo Hospitals
With a market cap of ₹101,582 crore, Apollo Hospitals stock has returned approximately 25.7% to shareholders in the past one year.
Apollo Hospitals Share Price Return: 1 year
View Full Image
Source: Screener.in
As the country’s first corporate hospital, Apollo Hospitals has established itself as Asia’s leading integrated healthcare services provider, with a strong presence throughout the healthcare ecosystem. This includes hospitals, pharmacies, primary care and diagnostic clinics, as well as various retail health models.
By the end of fiscal 2024, Apollo operated a total of 7,945 beds. This includes 2,557 new beds and 1,603 beds which were already operational. The overall occupancy rate for the hospitals stood at 65% at the end of the fiscal, up from 64% the previous year, attributed to a significant rise in patient flows throughout the network. In July 2024, the hospital revealed its acquisition of ₹103 crore stake in its subsidiary, Apollo Health and Lifestyle (AHLL), through a rights issue. This strategic investment is designed to strengthen AHLL’s ability to deliver quality healthcare services throughout India. The funding will also support AHLL in its business operations, working capital needs, and future expansion plans.
For FY2024, its revenue reached ₹19,059 crore, marking a 15% growth from ₹16,612 crore in the previous year. This was largely driven by a 14% jump in revenues of the Healthcare Services (HCS) segment. In the full fiscal year 2024, Apollo Hospitals reported a consolidated profit after tax of ₹898 crore, reflecting a 33% increase from ₹676 crore in the previous year. The hospital reported an ARPOB of ₹57,488 per bed per day, up 11.25% from FY23.
The stock is currently trading at a trailing price-to-earnings multiple of 85.9x.
Yatharth Hospital & Trauma Care Service
With a market cap of ₹5,233 crore, Yathartha Hospitals stock has returned 56% to shareholders in the past one year.
Yatharth Share Price Return: 1 year
View Full Image
Source: Screener.in
Founded in 2008, Yatharth Hospital and Trauma Care Services operates a network of multi-specialty hospitals across Noida, Greater Noida, and Noida Extension. Currently, it boasts a total capacity of 1,605 beds across five hospitals. The organization operates four super-specialty hospitals in Delhi NCR—located in Noida, Greater Noida, Greater Noida West, and Faridabad—with capacities of 250, 400, 450, and 200 beds, respectively. Additionally, it has a 305-bed hospital in Jhansi-Orchha, Madhya Pradesh.
In late October 2024, Yatharth announced a strategic partnership agreement to acquire approximately a 60% stake in MGS Infotech Research & Solutions Pvt. Ltd, a 400-bed hospital located in Faridabad, Haryana. The company plans to invest an additional Rs100 crore into the new facility to upgrade it with state-of-the-art medical equipment. This investment will enable the hospital to offer advanced super specialty services, including a comprehensive range of oncology treatments and robotic surgeries.
Around the same time, Yatharth also announced the successful acquisition of a super specialty hospital in Delhi through an e-auction under the SARFAESI Act 2002. This well-established hospital, located in Model Town, New Delhi, provides a wide range of high-end super specialty services. With the potential to expand to over 300 beds, the hospital serves a large and diverse clientele, including both residential and institutional customers.
For the entire fiscal year 2024, the company reported a 74% increase in consolidated profit and a 29% increase in revenue, totaling ₹114.5 crore and ₹670.5 crore, respectively. The company registered a PBT of ₹113 crore in the fiscal, up 32.9% from the year-ago period. PAT or net profit came in at ₹83.99 crore, an increase of 31.2% from FY23. For the Q2FY25, the company registered a 10% Y-o-Y increase in its ARPOB to ₹30,597. This was mainly propelled by bed occupancy increasing to 60%, and a gradual decline in low-yielding government health insurance-linked business.
The stock is currently trading at a trailing price-to-earnings multiple of 40.5x, which compared to its peers appears more reasonable. Here’s a look at the comparative valuations of the sector:
Valuation Comparison with Peers
View Full Image
…
As can be seen, valuations range from about 31x to nearly 97x training twelve months earnings.
Also Read: Singles are hot: Why private equity firms are increasingly investing in these hospitals
Challenges of the hospital sector
Private hospitals most often find it difficult to face challenges to keep operations cost-effective as the infrastructure and technology are highly capital-intensive. This keeps hospital profits margins considerably lean. Profitability of hospital stocks is also dependent on fluctuating economic cycles and patient volumes. Navigation of regulatory complexities and malpractice lawsuits can also make it risky to invest in hospital stocks.
Future growth prospects
An increasing inflow of investments in infrastructure as well as strategic acquisitions, are anticipated to keep bolstering the revenue and profitability of the leading hospital networks of the nation. On the demand side, the general increase in standard of living, and also the impact of covid-19 pandemic, which enhanced the need for better and preventive healthcare, the dynamics of the sector look strong.
Whether the stock prices already reflect this growth, or perhaps there’s more to do, only time will tell.
For more such analysis, read Profit Pulse.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Sriparna Ghosal is an experienced financial writer. Her interest extends to global stocks as well. She has studied Economics at the Calcutta University.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
Also Read: This smallcap hotel stock is turning around. What’s next?
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.
Aggregated From –
Comments are closed.