Shares of hospital companies surged by up to 3 per cent on Wednesday, defying a broader market downturn, as expectations of robust earnings growth buoyed investor sentiment. Max Healthcare Institute and Krishna Institute of Medical Sciences (KIMS) reached record highs, with Max Healthcare trading at ₹1,227.50 and KIMS at ₹668. Meanwhile, the BSE Sensex dropped 0.55 per cent to 77,772 at 11:38 AM.
Rising demand amid health concerns
The central government recently urged states to enhance surveillance of influenza-like illnesses (ILI) and severe acute respiratory infections (SARI) following a surge in Human Metapneumovirus (HMPV) cases in China. Union Health Secretary Punya Salila Srivastava chaired a meeting earlier this week to assess India’s preparedness for respiratory illnesses, particularly HMPV cases, signalling increased healthcare vigilance.
Max healthcare: Leading the sector
Max Healthcare Institute, one of India’s largest healthcare organisations, continues to stand out with its commitment to clinical excellence and cutting-edge technology. Beyond its hospitals, Max Healthcare operates Max@Home, offering health and wellness services at home, and Max Labs, which provides diagnostic services to patients outside its hospital network.
Analysts predict continued growth for Max Healthcare, underpinned by strategic expansions through brownfield, greenfield, and inorganic projects. Motilal Oswal Financial Services highlights the company’s potential for strong revenue growth, citing its ability to achieve quicker Ebitda breakeven for newly added beds, enhancing operational efficiency. The brokerage firm has assigned a ‘Buy’ rating with a sum-of-the-parts (SoTP) target price of ₹1,380.
KIMS hospitals: Expanding horizons
KIMS Hospitals, a leading healthcare provider in Telangana, Andhra Pradesh, and Maharashtra, focuses on affordable tertiary and quaternary care across 25 specialties. These include cardiac sciences, oncology, orthopaedics, and organ transplantation.
The hospital chain is poised for accelerated growth, with analysts from JM Financial Institutional Securities projecting a 29 per cent revenue and Ebitda CAGR over the next three years. KIMS is enhancing its presence in high ARPOB (average revenue per occupied bed) regions and improving its case mix in Andhra Pradesh and Telangana. This is expected to boost Ebitda per occupied bed and elevate the company’s valuation. JM Financial maintains a ‘Buy’ rating on KIMS with a target price of ₹670.
Aggressive bed expansion plans
India’s listed hospital chains are gearing up for significant capacity expansion, with plans to add 16,707 beds between FY25 and FY27, compared to 6,330 beds added from FY20 to FY24. This expansion, costing ₹20,200 crore, will involve 52 per cent greenfield and inorganic projects and 48 per cent brownfield initiatives.
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The private healthcare industry in India, currently valued at approximately ₹38,000 crore, is expected to grow at a compound annual growth rate (CAGR) of 13 per cent over the next three years. Analysts at Axis Securities estimate this growth will create an incremental annual demand of ₹6,000 crore, further strengthening the sector.
Strong financial position
With robust cash flows and a strategic focus on expansion, Max Healthcare and KIMS are well-positioned to capitalise on India’s growing healthcare demand. Max Healthcare, in particular, is expected to maintain strong profitability as it scales its operations. Similarly, KIMS is projected to remain one of the fastest-growing hospital chains in the country, driven by its entry into lucrative markets and strategic investments in enhancing service quality.
Outlook and investor confidence
The impressive performance of hospital stocks amidst a weak market reflects investor confidence in the sector’s resilience and growth prospects. Rising healthcare demand, coupled with government initiatives to address public health concerns, underpins the strong outlook for companies like Max Healthcare and KIMS.
As these organisations expand their footprints and optimise operations, the healthcare sector is poised to remain a key driver of economic growth in India. The continued focus on capacity building and service enhancement ensures that hospital stocks will likely remain attractive to investors seeking long-term returns.
