Sentiment around hospital stocks has been on the rise, fuelled by aggressive capacity expansion as players tap into India's underpenetrated healthcare market. Brokerage firm Jefferies believes the sector offers strong earnings visibility in an uncertain market, making it a compelling investment opportunity.
Jefferies advises investors to view any weakness in hospital stocks as a buying opportunity, given the sector’s resilient growth. The brokerage favours hospitals with significant brownfield bed expansion plans in the coming years, ranking Max Healthcare as its top pick, followed by Fortis Healthcare, Apollo Hospitals, and Medanta operator Global Health.
While shares of Max Health, Apollo Hospitals and Fortis Healthcare have slumped 10-14 percent year-to-date, Global Health emerged as an outlier, gaining 10 percent in the same period.
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Meanwhile, Adani Group has announced its entry into the healthcare sector, unveiling plans to establish Mumbai’s largest private hospital on a seven-acre plot in Kandivli. The 1,000-bed facility will include a medical college. The Adani Group is set to invest Rs 6,000 crore to develop two 1,000-bed multi-specialty hospitals and medical colleges in Mumbai and Ahmedabad, in collaboration with US-based Mayo Clinic. However, Jefferies does not expect Adani's foray to significantly alter the competitive landscape of the sector.
Hospital stocks have faced headwinds due to calls for price standardisation and increased free bed allocations, leading to a sharp correction over the past two years. However, Jefferies notes that concerns have since eased, as investors realised that these regulatory risks had minimal impact on hospital operators.
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