Hospital stocks gain up to 3% in weak market; Max, KIMS hit new highs

With robust cash flows and strategic expansions, Max is well-positioned for continued profitability and growth, while analysts expect KIMS to continue to be one of the fastest-growing hospital chains

Shares of hospital companies are trading higher by up to 3 per cent on the BSE in Wednesday’s intra-day trade in an otherwise weak market on expectations of a healthy earnings growth. The market price of Max Healthcare Institute (Rs 1,227.50) and Krishna Institute of Medical Sciences (Rs 668) has hit their respective new highs. In comparison, the BSE Sensex was down 0.55 per cent at 77,772 at 11:38 AM.

 

The central government has advised states to increase surveillance of influenza-like illness (ILI), or severe acute respiratory infections (SARI), following reports of a surge in HMPV cases in China. The advice came following a meeting held by Union Health Secretary Punya Salila Srivastava on Monday to examine the current status of respiratory illnesses in India, particularly focusing on Human Metapneumovirus (HMPV) cases, the Business Standard reported.

 

 

Max Healthcare Institute Limited (Max Healthcare) is one of India’s largest healthcare organisations. It is committed to the highest standards of clinical excellence and patient care, supported by latest technology and cutting-edge research. In addition to the hospitals business, Max Healthcare also operates homecare and pathology businesses under brand names Max@Home and Max Labs, respectively. Max@Home offers health and wellness services at home, while Max Lab provides diagnostic services to patients outside its network.

 

KIMS Hospitals is one of the largest corporate healthcare groups in India with hospitals in Telangana, Andhra Pradesh, and Maharashtra, providing multidisciplinary integrated healthcare services, with a focus on tertiary and quaternary healthcare at an affordable cost. The company offers a bouquet of comprehensive healthcare services across 25 specialties, including cardiac sciences, oncology, neurosciences, gastric sciences, orthopedics, organ transplantation, renal sciences, and mother & child care.

 

Over FY25-27, listed hospitals plan to add a total of 16,707 beds (vs. 6,330 beds added over FY20-24) for a combined capex of Rs 20,200 crore. About 52 per cent of those beds would be added through greenfield/inorganic projects and 48 per cent via brownfield.

 

The private healthcare industry in India currently has an industry size of approximately Rs 38,000 crore. It is projected to experience a compound annual growth rate (CAGR) of 13 per cent over the next three financial years. This growth is expected to generate an annual incremental demand of Rs 6,000 crore, analysts at Axis Securities said in its hospital sector report.

 

With robust cash flows and strategic expansions, Max Healthcare is well-positioned for continued profitability and growth, according to analysts.

 

For instance, analysts at Motilal Oswal Financial Services believe that Max’s expansion via a combination of brownfield, greenfield and inorganic channels will drive strong revenue growth and pave the way for quicker earnings before interest, taxes, depreciation, and amortisation (Ebitda) breakeven for new beds, thus driving higher operating leverage benefits. The brokerage firm has a 'Buy' rating on Max, with a SoTP (sum of the parts)-based target price of Rs 1,380.

 

Looking ahead, analysts at JM Financial Institutional Securities anticipate KIMS will continue to be one of the fastest-growing hospital chains in India, with projected revenue/Ebitda CAGRs of 29 per cent each over the next three years. The company's entry into high ARPOB (average revenue per occupied bed) regions, and its strategies to enhance the case mix in Andhra Pradesh and Telangana are expected to improve Ebitda per occupied bed, which should positively influence the valuation, the brokerage firm said in a research note, while maintaining its 'Buy' rating on the stock, with a target price of Rs 670.