Fortis Healthcare (FHL) reported Q2FY22 performance better than ICICI Securities’ estimates mainly on profitability front supported by highest ever ARPOB. Both segments hospitals & diagnostics have reported healthy recovery during the quarter under review. The brokerage expects the trend to continue with improving occupancy and normalisation of the environment.
The brokerage has revised its target price to ₹303 per share (from ₹282) on the stock even as it has a Hold rating on Fortis shares as it remains positive on growth recovery, cost optimisation efforts and potential operating leverage outlook.
Fortis’ revenue during the second quarter grew 47% year-on-year with hospitals and SRL (diagnostics) both growing. . EBITDA margin remained flat sequentially at 19.4% with costs slowly normalising. The company’s management continues to implement measures to keep costs in check, the note highlighted.
The company continues to implement cost control initiatives. The brokerage believes the cost control measures along with gradual revenue growth recovery would help in improving EBITDA margin by 820 bps over FY21-FY23E to 18.2%.
“We raise revenue estimates by 5-6% and EBITDA estimates by 5-10% over FY22E-FY23E to factor in recovery in SRL and increase in hospital occupancy and ARPOB. We estimate revenue and EBITDA CAGRs of 29.5% and 74.2% respectively over FY21-FY23E. Supreme Court judgement on the pending open offer by IHH is still awaited,” ICICI Securities’ note added.
As per BSE shareholding pattern, Indian ace investor and stock market trader Rakesh Jhunjhunwala holds 4.23% stake in Fortis Healthcare Ltd as of September 2021.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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