Buy Fortis Healthcare; target of Rs 1140: Choice Institutional Equities

Choice Institutional Equities's report on Fortis Healthcare

FORH expects continued double-digit revenue growth, driven by higher occupancy, rising ARPOB and brownfield expansion. Hospital margin is seen to be improving toward 25%, supported by oncology, robotic surgeries and digital integration. Agilus Diagnostics targets steady mid-single-digit growth and 24–25% EBITDA margin through focus on specialised and preventive testing. View and Valuation: FORH is progressing well with its cluster strategy, led by hospital margin expansion and diagnostics scale-up. We maintain our ‘BUY’ rating and revise our target price to INR 1,140 (from INR 1,000), based on an SoTP valuation (see Exhibit 2). We revise the hospital business multiple at 29x EV/EBITDA on an average of FY27–28E, reflecting ARPOB growth and capacity additions. We also revise the multiple of diagnostics segment at 25x EV/EBITDA on average of FY27–28E, factoring in margin improvement.

Outlook

The company is targeting to reach 25% EBITDA margin for the hospital business in the next couple of years. Planning bed capacity expansion across multiple facilities including: 225 beds at FMRI, 70 beds in Kolkata and additional beds in Manesar and Bangalore. The International Patient business is expected to remain strong, contributing ~8% to total revenue.