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Q2FY27 is expected to be healthy quarter for our coverage hospitals, driven by ramp up of recently added new beds and steady improvement in base-business. Further Q2 being seasonally strong quarter will also aid better occupancy QoQ. Overall, we estimate the sector to deliver ~20% YoY and 12% QoQ EBITDA growth.  Occupancy for few companies is likely to see YoY decline given new bed addition largely greenfield in nature. Despite initial losses at new units, healthy ARPOB momentum, improving operating leverage and continued bed additions keep the medium-term growth outlook intact. Our top picks are APHS, MEDANTA and HCG.

MEDANTA, KIMS and APHS likely to deliver strong quarter: MEDANTA is likely to deliver strong ~30% YoY EBITDA growth driven by the continued ramp-up of the Lucknow and Patna unit. Further Noida unit should break-even supported by improving occupancy and operating leverage. KIMS is likely to report strong EBITDA growth of ~28% YoY, aided by ramp up in newly operationalized beds at Kondapur, Thane and Mahadevapura. Further improving profitability across Nashik, Vizag (QNRI), Guntur, and Kerala cluster should support margin expansion. In case of APHS, we estimate ~25% YoY growth in consolidated EBITDA led by ~16% YoY growth in the core hospital business aided by ramping up in new bed additions and margin expansion in the base portfolio. HealthCo should be a key incremental driver, with EBITDA expected to nearly double YoY as losses from 24x7 gets further reduced.

Single-specialty hospitals will see moderate YoY EBITDA growth: RAINBOW is likely to report moderate ~13% YoY EBITDA growth, despite strong revenue growth of 20% YoY. Overall margins to weighed down by losses from new units, higher costs for marketing and new doctor hiring. On other hand, HCG is expected to deliver ~13% YoY EBITDA growth, impacted by losses from new unit commercialized in North Bangalore and sale of fertility business in Q1FY27. Adj for this we see 17-18% YoY EBITDA growth.

ASTERDM, MAXHEALT and NARH to report healthy YoY growth: ASTERDM’s combined (including QCIL) EBITDA growth will be at ~17% YoY (+12% QoQ); aided by strong cluster ramp up across both ASTERDM and QCIL. Newly added brownfield 75 beds at Ramesh Ongole and 159 beds at Whitefield, both are ramping well. NARH’s EBITDA is likely to grow ~33% YoY, driven by continued momentum in the India and Cayman businesses and consolidation of the recently acquired UK asset. India hospital EBITDA should grow ~19% YoY on improved operating leverage, while Cayman EBITDA is expected to increase ~23% YoY.  We expect losses from insurance business to remain elevated. Adjusted to the UK asset and insurance losses, EBITDA growth is estimated at ~20% YoY. In case of MAXHEALT, EBITDA is expected to grow ~14% YoY, due to continued pressure from the CGHS drug-related impact on the oncology segment. The ramp up of Saket and Nanavati remains on track, while growth should be supported by the addition of beds including the consolidation of the Bhubaneswar acquisition.

New unit’s losses and ESOPs costs to drag profitability for JLHL & FORH: We expect JLHL to report flat YoY EBITDA growth impacted by losses from newly commissioned greenfield Dombivli unit and also Q2FY26 had certain one-offs related to unbilled revenues. We expect losses from the new greenfield unit in Dombivli to be at INR55-60mn in Q2 vs Rs90mn in Q1.  In case of FORH, is likely to deliver 9% YoY EBITDA growth; adjusted for ESOPs cost EBITDA growth will be at ~16% YoY. Growth in the hospital segment will be healthy at ~17% YoY.  Diagnostic segment to deliver ~12% YoY EBITDA growth.

Margins a mixed bag: Sequentially margins to improve on seasonality and ramp up of new beds. However, YoY margins are expected to remain a mixed bag due to new hospitals related expenses. MEDANTA and APHS are expected to benefit from operating leverage and ramp up of new unit, while RAINBOW, KIMS and JLHL are likely to see YoY decline due to start-up losses from new units and higher doctor cost.  In case of NARH, YoY margin drag expected due to consolidation of UK asset.

Occupancies to improve sequentially: Occupancies are expected to improve QoQ due to seasonality.

Healthy ARPOB growth to sustain: ARPOB growth remains a key positive and is expected to range healthy YoY across companies. Higher case complexity, better payor mix, improved sequential occupancies on seasonality and periodic price revisions continue to support realizations in Q2.

Sector outlook remains positive: With the hospital sector witnessing continued demand, corporatization, higher elective and complex surgeries, and increasing insurance penetration, preference for large hospital chains is increasing. To meet the rising demand, hospitals companies under our coverage have earmarked large bed additions over the next 4-5 years. Overall, we see 15-28% EBITDA CAGR over FY26-29E for our coverage universe. The recent regulatory overhang with likely cap on mark-ups of medicines and consumables remains a key monitorable, any such cap with impact profitability in near term.

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