Why Jefferies is bullish on Indian hospitals stocks


According to Jefferies, the recent correction makes the hospital space appealing. Hospitals in Jefferies’ coverage area are planning to expand capacity by 26-86 percent over the next five years, according to the global brokerage, although obstacles have surfaced in non-hospital components such as diagnostics and eHealth.

The space is now more appealing as a result of the recent adjustment. Capex, margin predictions, and allied business assumptions have all been modified by Jefferies across coverage.

Fortis Healthcare has a target price of 273 (previously 301), Max Healthcare Institute has a target price of 425, and Apollo Hospitals has a price objective of 4,461 (before 4,299), according to the brokerage.

“Due to low valuations and a capacity-led development path ahead, Fortis is our top stock recommendation among Indian hospitals.” We like Max because of its best-in-class metrics, but it also trades at a premium because of them. As a result, our pecking order is Fortis > Max > Apollo,” according to the note.

During non-Covid quarters, Max’s Group level occupancies have hovered around 74 percent. Max Healthcare’s existing beds are expected to achieve a peak occupancy level of 76 percent by FY24, according to Jefferies, which will help the business generate an additional $1 billion in revenue.

Furthermore, cash patients and TPA should continue to be the most important drivers of top-line and EBITDA growth.

The brokerage thinks Fortis’ valuations are too good to pass up. “With a well-staggered bed expansion plan, we retain our Buy recommendation for Fortis, which trades at a 28 percent / 32 percent discount to Max/Apollo.

We do not feel Fortis Healthcare’s substantial multiple discount compared to peers like Max and Apollo Hospitals is justifiable “It was also mentioned.

“Apollo Hospitals has been attempting to obtain funds for its HealthCo subsidiary, which comprises the pharmacy and digital company, for the past year. However, it has now abandoned or postponed the plans, creating uncertainty about the business segment’s valuation.

We value Apollo Pharmacy at pre-24/7 investment EBITDA, using a straightforward approach “According to Jefferies’ report. The brokerage thinks Fortis’ valuations are too good to pass up.

That is correct. For the past six to eight months, we’ve been observing a trend from the perspective of international investors. In six of the last eight months, foreigners have been net sellers on the secondary market.

The reason for this is that the overall number includes IPO subscriptions, so you might see a somewhat better number than what I just told you.

As a result, it’s evident that foreigners have been selling down their current assets in order to participate in some initial public offerings.

However, in the secondary market, it’s been almost entirely one way, with banks and financials bearing the brunt of it.

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