Additionally, HDFC Securities has assigned an ‘add’ rating to Max Healthcare Institute, Dr. Lal PathLabs, and Metropolis Healthcare, with price targets of ₹900, ₹2,700, and ₹2,010, respectively.
The brokerage anticipates that India’s healthcare sector is on track for continuous expansion, driven by factors such as an aging population, a rise in lifestyle-related diseases, heightened healthcare awareness, technological advancements, and the expanding affluent middle class.
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The healthcare landscape in the country, primarily consisting of hospitals (57% of total), diagnostics (8%), and retail pharmacies (pharma share 19%), is projected to achieve an 11–12% CAGR over the period from FY23 to FY28, reaching an estimated value of ₹16.5–17.5 trillion by FY28, said the brokerage.
Hospital sector: Post the capex phase of FY14-19 to expand bed capacities, the companies are in an execution phase with a focus on improving occupancy, case, and payer mix, leading to steady growth in ARPOB, advanced technology to lower ALOS, and all this translated into a significant expansion in EBITDA margin in the hospital business.
The brokerage expects this growth momentum to continue with a scope of improving occupancy across the hospital network and steady ARPOB growth. It believes the next capex phase, from FY25 onwards, will support growth, but this time, it said, it is more strategic expansion with a focus on the asset-light model, which could see a marginal impact on profitability.
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Diagnostic sector: Diagnostics play a key role in the management of health and the prevention, evaluation, and treatment of disease. It has a role in every step of the healthcare value chain, from wellness testing to the detection of disease right up to post-treatment monitoring and management.
The sector experienced a decline in FY23, largely due to a sharp drop in COVID-19 and COVID-19-allied testing revenues. The ex-COVID business saw growth and recovery.
Going ahead, the brokerage expects growth to normalise to 12–13% over FY23–26E on the back of favourable macros, geographical expansion, price hikes in select tests, volume recovery, and scale-up in the wellness and preventive care segment.
It highlighted that heightened competition from established hospitals (Apollo, Aster, and Max), corporate entities (Lupin), and emerging digital companies, coupled with aggressive discounting tactics from well-funded online competitors (Reliance and Tata), are likely to persist as significant challenges for conventional firms.
Retail pharmacies: According to the brokerage, the overall retail market in India saw a steady 9% CAGR over 2018–23 and was valued at ₹76,066 billion in 2023. It expects to register a CAGR of 10% to ₹1,13,399 billion by 2027.
“Within the retail market, the retail pharmacy and wellness categories were 3% of India’s retail market at ₹2,272 billion in 2023, reflecting a CAGR of 10% over 2018–23 and is expected to see a CAGR of steady 12% to reach ₹3,575 billion by 2027,” said HDFC Securities.
With faster-than-industry growth, the brokerage expects the pharmacy business share in the overall retail market to improve from 3% in 2023 to 3.2% in 2027.
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 taking any investment decisions.
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Published: 20 May 2024, 03:52 PM IST