Fortis Healthcare share price gains 2%: up more than 50% in a year. Here’s why
Stock Market Today- Fortis Healthcare gains more than 2% on Thursday adding to around 50% gains seen in the last one year. Analysts expect more gains led by rising average revenues per operating bed and multiple levers to support margin improvement leading to improved earnings outlook.
Fortis Healthcare saw its share price gain more than 2% on Thursday. The stock with gains of more than 50% in the last year is trading near 52-week highs seen recently. The gains are being led by rising occupancy, improved number of in patients, higher procedures and surgeries, rising insurance penetration, rebound in medical tourism and expansions being undertaken by hospitals.
The analysts expect more gains for the stock as they see improved earnings prospects. The analysts also say that as earnings prospects remain strong in hospitals segments, while Non hospitals divisions like diagnostics (for Fortis) should reduce their drag effect from FY25 onwards too.
Also Read-Jefferies says weakness likely to continue in specialty chemicals; check its ratings on SRF, PI Industries and more
Analysts remain positive on the expected rise in Average revenues per operating bed (ARPOB). Analysts at Nomura Research have recently increased our ARPOB CAGR (compound annual growth rate) assumption over FY25-30 from 4% to 5.8%, factoring in the expectation of sustained improvement in case mix and payor mix along with price hikes. Also, the newer brownfield capacity is expected to come up over next 4 years in facilities with relatively high ARPOBs (15% higher than the company average on a blended basis, in our view) which should support the ARPOB improvement, they said
Fortis Hospital should see improvement in its earnings before interest tax depreciation and amortisation (Ebitda) and margins also because of these reasons. Fortis has been working to turn around its low margin. loss-making facilities. Analysts at Nomura estimate that six sub-optimal facilities in Fortis network had an adverse impact of 300bps in FY23. Out of these, divestment of two facilities (Arcot Road and Malar) has already been announced in line with the company’s strategy of focusing on its key geographies, sais analysts at Nomura. 100 basis points make a per cent.
As focus on higher margin facilities remains a positive, the operating leverage through brownfield expansion; and improvement in case mix and payor mix also will support margins. Analysts at Nomura expect Fortis to benefit from an increasing volume of international patients and patients with insurance coverage. “We forecast the hospital segment’s EBITDA margin to improve to 20.2% in FY25 (in line with the company’s guidance of 20%) from 16.9% in FY23” said analysts at Nomura. This can further rise to high-20% in the long run, in their view.
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
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High