The shares of Fortis Healthcare Ltd witnessed a 6% surge on Monday, propelled by the “Buy” recommendation and an upward revision of the target price from ₹388 to ₹475 per share by Japanese broking firm Nomura. As of 10:55 am, the stock was trading at ₹443.95 apiece on the NSE, reflecting a 5.90% increase.
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Nomura expressed confidence in the company’s potential for margin expansion, citing various levers in place. The global investment bank anticipates a rise in the hospital segment’s EBITDA margin from 16.9% in FY23 to 20.2% in FY25, driven by factors such as an enhanced average revenue per operating bed (ARPOB) over the medium term.
Nomura highlighted the expected establishment of newer brownfield capacity over the next four years as a supportive factor for ARPOB improvement. The brokerage also factored in the anticipation of sustained enhancements in case mix, an improvement in payor mix, and the implementation of price hikes.
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Despite the company’s valuation aligning with sector ratings, Nomura emphasized that Fortis Healthcare Ltd remains competitively priced compared to its peers. In its financial report for the second quarter ending September 30, 2023, the company recorded a 15.7% YoY decline in net profit at ₹183.9 crore. However, there was a 10% increase in revenue from operations, reaching ₹1,770 crore.
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At the operational level, EBITDA showed an 8.8% rise to ₹329.9 crore in the second quarter of the fiscal year, with an EBITDA margin of 18.6%. EBITDA represents earnings before interest, tax, depreciation, and amortization.
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Published: 01 Jan 2024, 06:30 PM IST