Nomura raises price target on this hospital stock, sees another 13% upside
Nomura believes there are adequate levers in place to deliver margin expansion. Factoring in the positives, the global investment bank sees the hospital segment's EBITDA margin to improve to 20.2% in FY25 from 16.9% in FY23.
Shares of Fortis Healthcare Ltd rallied 6% on Monday after Japanese broking firm Nomura maintained a "Buy" recommendation on the stock and raised its target price to ₹475 from ₹388 per share. At 10:55 am, the scrip was trading 5.90% higher at ₹443.95 apiece on the NSE.
The brokerage believes there are adequate levers in place to deliver margin expansion. Factoring in the positives, the global investment bank sees the hospital segment's EBITDA margin to improve to 20.2% in FY25 from 16.9% in FY23.
Nomura sees improvement in average revenue per operating bed, or ARPOB, growth over the medium term.
It said that newer brownfield capacity is expected to come up over the next four years and that should support the ARPOB improvement.
The broking firm has factored in expectation of sustained improvement in case mix, and has also factored in expectation of an improvement in payor mix along with price hikes.
Additionally, while the valuation of the company has improved in line with the sector rating, it is still cheaper than peers, Nomura noted.
Fortis Healthcare Ltd has reported a 15.7% year-on-year decline in net profit at ₹183.9 crore for the second quarter that ended September 30, 2023. The company's revenue from operations increased 10% to ₹1,770 crore.
At the operating level, EBITDA increased 8.8% to ₹329.9 crore in the second quarter of this fiscal. EBITDA margin, meanwhile, stood at 18.6% in the reporting quarter. EBITDA is earnings before interest, tax, depreciation, and amortization.
First Published: Jan 1, 2024 11:57 AM IST
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