Fortis, Max, Apollo: Why Jefferies is bullish on Indian hospitals stocks


Hospitals in Jefferies’ coverage are expanding capacity over the next few years by 26-86%, the global brokerage said, however, challenges have emerged in non-hospital components like diagnostics/ eHealth. The recent correction makes the space attractive. 

We tweak capex, margin estimates driven by bed expansion and allied business expectations across coverage. The brokerage has all Buys tags with a pecking order of Fortis Healthcare with target price of 273 (earlier 301), Max Healthcare Institute with target price of 425, and Apollo Hospitals with price target of 4,461 (earlier 4,299)

“Fortis is our top pick among hospitals because of low valuations and capacity-led growth path ahead. We like Max for its best-in-class metrics but it trades at a premium valuation for the same reason. Thus, our pecking order is Fortis > Max > Apollo,” the note stated.

For Max, Group level occupancies have hovered near the 74% mark during non-Covid quarters. Jefferies expects that by FY24 Max Healthcare’s existing beds will reach peak occupancy level of 76% and will help the company bring in an additional 1 bn in revenue. Further, cash patients and TPA should remain the largest driver for top-line as well as EBITDA.

The brokerage believes Fortis’ valuations are too attractive to ignore. “We maintain our Buy rating for Fortis as it trades at 28%/32% discount to Max/Apollo with well-staggered bed expansion plan. We do not believe the large multiple discount for Fortis Healthcare vs peers like Max and Apollo Hospitals is justified,” it added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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