Fortis Healthcare shares slip; net profit falls 15% in Q2

Occupancy stood at 68.7 percent in Q2FY24, falling mildly on a YoY basis.

Shares of Fortis Healthcare slipped 1.4 percent in early trade on November 13 after the hospital operator reported falling profits for the quarter ended September.

Fortis Healthcare reported a 15.7 percent year-on-year (YoY) fall in net profit at Rs 183.9 crore for the July-September quarter. Fortis had a net profit of Rs 218.2 crore in the same period a year ago.

As of 9.33 am, shares of Fortis were trading at Rs 353.75 apiece on the NSE, lower by 1.3 percent from the closing price of the previous session.

The revenue clocked in at Rs 1,770 crore, rising 10 percent year-on-year from Rs 1,607 crore. Revenue growth was primarily driven by a healthy improvement in average revenue per operating bed, number of occupied beds, and an improved case mix.

Occupancy stood at 68.7 percent in Q2FY24, which was marginally lower than 69.6 percent in Q2FY23.

Many of the Fortis Healthcare’s key facilities in Noida, Anandpur, and FEHI recorded healthy growth in revenues and witnessed margin expansion both versus the corresponding and trailing quarters.

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Fortis Healthcare filed the Draft Red Herring Prospectus (DRHP) for a proposed IPO of Agilus Diagnostics, its diagnostics business vertical in September 2023.

The management is on track to adding 250 beds in FY24 to its network across facilities in Mulund, Anandpur in Kolkata, BG Road in Bangalore, and in Ludhiana. In addition, the management evaluated new opportunities to optimise the current available space in additional beds in Mohali and Shalimar Bagh.

The healthcare player’s management maintained its margin guidance of 20 percent for FY25 on enhanced capacity and focus on cost-side to lead to margin improvement. However, an increase in the staff cost due to recently on-boarded clinicians and increase in guaranteed payments will pose some threat.

“We remain optimistic on Fortis due to the significant brownfield bed addition; average revneue per bed growth led by high end specialty services; improvement in the margin; healthy FCF generation and ROE/ROCE curve moving upwards. However, we understand the current valuations have factored-in most of the positives,” said Choice Broking, maintianing its neutral rating, with a target price of Rs 364 apiece.

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