Max, Fortis, Apollo, Medanta, others: 3 key reasons why Jefferies sees a buying opportunity in Hospital Stocks

Stock Market Today: Max Healthcare Ltd, Apollo Hospitals Enterprise Ltd, Fortis Healthcare Ltd and Medanta (Healthcare Global ltd) share prices have traded volatile with pressure on the markets. The Max Healthcare, Apollo Hospitals Enterprise, Fortis Healthcare, Medanta share price are trading around 20% lower than their 52 week highs

Apart from correction seen with down turn in the markets recently, analysts at Jefferies India Pvt Ltd have said that over past two years, the negative news flows related to price standardisation and increasing free bed allocation drove a swift correction in hospital stocks. However, the recovery was equally fast once investors realised that the impact is insignificant. Jefferies believes recent news flow of Adani Group entering healthcare is unlikely to alter the competitive landscape as feared;. Weakness in stocks thereby should be used as a buying opportunity, given resilient earnings outlook.

3 Key Reasons why Jefferies sees a buying opportunity

1. Price standardisation and increasing free bed allocation- Insignificant impact- In Supreme Court a public interest lawsuit (PIL) to standardize healthcare service costs was launched in February 2024, and also the Haryana government suggested expanding the number of free or subsidized beds in April 2023. However when investors realized that it was very difficult, if not impossible, to impose uniform rates on medical services, stocks experienced a rapid recovery in the months that followed these negative newsflows.

2. Adani Group entry in Mumbai has been another reason for correction

Jefferies analysts said that while News report suggest entry of Adani group in Hospitals in Mumbai and ahmedabad. However, Mumbai Metropolitan Region (MMR) had 33 beds per 10,000 people as of March 2023, Jupiter Hospital's RHP filing. The bed density would be even poorer for quality tertiary care beds, in their view. Also, the hospital from Adani Group will take at least 3-5 years to commission and is unlikely to alter the competitive dynamics resulting in any pressure on profitability/ROCE profile, said Jefferies

3. Hospital stocks have excellent earnings visibility:

In an a market that is otherwise unpredictable, hospital stocks have excellent earnings visibility, said Jefferies.

Over FY25–27 estimates , Jefferies covered hospital names are expected to generate 13-21% Ebitda CAGR for their hospital operations. Higher predictability and certainty are provided by the Ebitda's growth, which is robust and impervious to macro variables like tariff wars, etc.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.