Pharmaceutical (pharma) companies are facing tariffs related to tariffs. Health check -up pathlab companies may also face sluggish growth in the fourth quarter. But hospital firms can perform strong in January-March. While the average growth for pharma and diagnostic stick companies is estimated to be 11-12 per cent on an annual basis, it can be 16-19 per cent for hospital firms.
Explaining the reasons behind this better performance, IIFL analyst Rahul Jeevani has recently cited improvement in beds, staying patients, average revenue (ARPOB) per operating beds, which expects a 19 percent increase in hospitals and 21 percent in operational benefits.
Krishna Institute of Medical Sciences (KIMS) and Global Health (Medanta) may be ahead in this category and can register a 25 % operating profit growth on an annual basis. The reason for this may be the help of companies from the lower base of the previous year.
In the fourth quarter of 2023-24, KIMS margin may be affected due to lump sum expense and market problems for Medanta. IIFL’s favorite shares in the region are KIMS, Apollo Hai Spitals Enterprise (Apollo) and Rainbow Children’s Medicare (Rainbow).
The Kotak Institutional e -Quite (KIE) has estimated a 16 per cent increase in the fourth quarter for its coverage hospital companies on an annual basis, which will help these companies from existing beds, new beds and increase in ARPOB. While ARPOB of KIMS and Narayan Hridayalaya is likely to be strong on an annual basis, ARPOB growth may be affected for companies like Apollo, Max Healthcare and Medanta, as it may be less than a change and change towards new beds and/or secondary care. The top likes of Kotak in the region are Apollo and Rainbow. This strength is expected to continue till 2025-26. The revenue growth of the top 10 listed hospital ranges is expected to be 21 percent according to the market value, while the operation and net profit is expected to increase by 23-23 percent. Margin is also estimated to improve. This is visible in the share performance.
During the last three months, hospital shares have given an average return of 12 percent while Nifty Pharma and Nifty Healthcare indices declined by 2-3 per cent, which is a 15 per cent margin. Similar trends have been seen during one month, six months and one year period. Narayana Hridayalaya has been the highest climbing share in largecap companies with a profit of 42-45 per cent during a period of 3 and 6 months. During this period, other shares that have performed healthcare global enterprises, KIMS and Medanta who gave returns between 19 and 35 percent.
In the last two years, the value of six of the nine top listed hospitals doubles and the average assessment is 52 times (which is double of the Nifty Healthcare Index), analysts hope that they will continue to rise.
MK Research analysts Anshul Aggarwal and Abin Benny said in their earlier report that high participation (60 percent) of brownfield and operation/management-operated expansion strategies reduces the implementation risks and reduces pressure on the return ratio, the credit goes to rapid improvement and profits in the credit.
He said that the evaluation of the region is likely to be strong with improving revenue possibilities, expansion of bed capacity, decrease in intensity of large scale capital expenditure and focus on capacity expansion.
First Published – April 20, 2025 | 10:02 PM IST
