Fortis Healthcare Ltd witnessed a significant surge of 6% in its shares, driven by a “Buy” recommendation and an upward revision of the target price by Japanese broking firm Nomura, raising it from ₹388 to ₹475 per share. The stock was trading at ₹443.95 apiece on the NSE, reflecting a 5.90% increase as of 10:55 am.
Nomura expressed confidence in Fortis Healthcare’s potential for margin expansion, citing various levers in place. The global investment bank anticipates a rise in the EBITDA margin for the hospital segment, projecting an increase from 16.9% in FY23 to 20.2% in FY25. This growth is expected to be driven by factors such as an enhanced average revenue per operating bed (ARPOB) over the medium term.
The brokerage firm highlighted the anticipated establishment of newer brownfield capacity over the next four years as a supporting factor for ARPOB improvement. Nomura also factored in the expectation of sustained enhancements in case mix, an improvement in payor mix, and the implementation of price hikes.
Despite Fortis Healthcare Ltd’s valuation aligning with sector ratings, Nomura emphasized that the company remains competitively priced compared to its peers. In its financial report for the second quarter ending September 30, 2023, the company recorded a 15.7% YoY decline in net profit at ₹183.9 crore. However, there was a 10% increase in revenue from operations, reaching ₹1,770 crore.
At the operational level, EBITDA showed an 8.8% rise to ₹329.9 crore in the second quarter of the fiscal year, with an EBITDA margin of 18.6%. EBITDA represents earnings before interest, tax, depreciation, and amortization. Nomura’s positive outlook on Fortis Healthcare Ltd’s margin expansion and competitive pricing compared to peers contributed to the surge in the company’s share price.
