Apollo Hospitals, Narayana shares scale 52-week high as Q2 results boost sentiment

Apollo Hospitals Enterprise Ltd, Narayana Hrudayalaya Ltd share price scaled 52-week highs on Friday while Fortis Healthcare, Max Healthcare Institute Limited, Global Health ltd ( Medanta) are trading close to their highs  seen recently. The investor confidence remains strong led by improving occupancy for Hospitals, rising average revenues per operating bed (ARPOB), rising non Covid treatment volumes etc that are helping lift their financial performance as was visible in Q2 results.

Analysts at Jefferies India Pvt Ltd in their result review report said that in 2QFY24, 3 of our 4 coverage hospitals delivered beats to their estimates while one was in line. The quarter saw healthy ARPOB as well as volume growth. Hospital divisions for all of their coverage universe clocked double-digit sales and EBITDA growth. Ebitda stands for Earnings before interest tax depreciation and amortisation. Payor mix continued to get boost from higher international revenue share while case mix got Oncology boost. They continue to like the sector and have Buy ratings on all four names: Apollo, Medanta, Max and Fortis.

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The volume growth reported during Q2 was strong in the back of better occupancy, and further aided by a rise in international patients. The rise in occupancy for new Hospitals is also aiding overall ARPOB growth for many.

The ARPOB have seen good double-digit growth with the exception of Global Healthcare or Medanta that saw the new Hospital In Patna pulling down overall average ARPOB growth. In 2QFY24, Fortis, Apollo and Max Healthcare registered double-digit YoY ARPOB growth while Medanta ARPOB increased in mid-single digit. Medanta ARPOB growth was lower than peers as their new hospitals in Patna are ramping up which have lower than company average ARPOB, said analysts at Jefferies. The strong ARPOB as per Jefferiess was due to Price hikes taken at start of the financial year for cash and self-pay patients. Partial rate increases for CGHS (central Government health Scheme) payors and the therapy mix. Another key aspect was that despite 2Q being seasonally ARPOB-dilutive quarter, ARPOBs have shown sequential flattish trends which implies that coming quarters will witness continued strong YoY ARPOB growth said analysts at Jefferies.

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The volume growth remained healthy and earnings were aided by improving payor Mix and Therapy mix. Max and Fortis saw meaningful increases in Oncology revenue share during 2QFY24

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