Healthcare Sector Report : Strong demand; large players
We visited five hospitals across North, Central and South Kerala during our three -day healthcare trip . These included Aster Medcity at Kochi , the flagship facility of Aster DM Healthcare (ASTERDM) and KIMSHEALTH Hospital at Thiruvananthapuram , part of Quality Care India (QCIL , merging with ASTERDM ) network . We also visited two hospitals recently taken over by Krishna Institute of Medical Sciences (KIMS) and a hospital run by a charitable trust under the Christian Church ( Rajagiri Hospital ). We witnessed very strong demand with managements indicating that they are forced to turn away patients. The supply gap has attracted new players , including KIMS and KKR private equity ( PE ), both with aggressive expansion plans . We do see the risk of large bed supply , but given the long timelines involved, only after 2 -3 years.
Demand outpacing supply: Demand for high -quality upscale hospital beds remains strong . Managements in the large established hospitals indicat ed that they turn away patients for want of beds . After the Covid pandemic, patient preference has shifted from lower -end hospitals and shared rooms / wards to high -end hospitals and individual rooms. However, there have not been large -scale additions in high -quality corporate hospital beds since then.
Shift from charitable trusts to corporates: Kerala’s healthcare landscape has long been dominated by charitable -trust -run hospitals, with Christian Church being the largest player . While these hospitals do provide good clinical care, they typically do not match the service levels of corporate hospitals in patient experience and comfort. With increasing affluence, the population is shifting to corporate hospitals for better ‘customer experience’ with matching or better clinical care.
Corporate and private equity (PE) players pitching in: S trong demand and inadequate supply have already caught the attention of corporate groups a nd PE players . Krishna Institute of Medical Sciences (KIMS) has already entered the state with two facility takeovers and KKR PE has acquired two hospitals. Both are on the lookout for further expansion opportunities in the state.
Watch out for oversupply risk in 3-4 years: Given aggressive expansion plans by new entrants , we do see the risk of the market going into an oversupply mode regarding corporate beds . However, given the long timelines involved, that is unlikely in the next 2-3 years.
ASTERDM – Estimates and rating unchanged: We maintain our forward estimates for ASTERDM . We have an Accumulate rating with a TP of INR 733. Competitive pressure from large capacity additions and adverse government regulations are key risks for the stock and the sector.
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