Buy Fortis Healthcare; target of Rs 1000: Prabhudas Lilladher

Prabhudas Lilladher's research report on Fortis Healthcare

Fortis Healthcare (FORH) reported strong EBITDA of Rs4.9bn, up 43% YoY, marking strong beat across segments. Though hospital margin has improved by 360bps bps YoY over FY23-25 to ~20%, we see further scope for improvement aided by 1) improving case and payor mix, 2) cost rationalization initiatives and ramp-up of Manesar unit, and 3) new brownfield bed additions. Additionally, we expect margin to expand further, driven by the recent acquisition of Shrimann Hospital and the O&M agreement with Gleneagles. Our FY26E and FY27E EBITDA stands increased by 6%. We expect EBITDA to clock 24% CAGR over FY25-27E.

Outlook

At CMP, the stock is trading at 28x EV/EBITDA on FY27E, adjusted for Agilus stake. Maintain ‘BUY’ rating with revised TP of Rs1,000/share, valuing the hospital segment at 32x and diagnostic segment at 30x EV/EBITDA on FY27E.

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