IGI Logo

The hospital sector is booming, posting double-digit growth fueled by strong leverage

Strong Q1FY26 Results expected: Healthcare companies under our coverage are set to begin the year on a strong note. We expect revenue growth averaging ~18% YoY, supported by favorable industry dynamics. Key drivers include a rising share of high-end specialties, an increase in operational bed capacity, and recovery in international patient footfalls.

While ARPOB (Average Revenue Per Occupied Bed) growth is likely to remain moderate YoY, EBITDA is expected to outpace revenue growth, with a projected 23% YoY increase across our coverage, reflecting improving operating leverage.

Occupancy rates should stay healthy in the 60–66% range for most players, with the exception of RAINBOW (42%) and MAXHEALT (72%)

Factors Driving Long-term Growth:

* From metros to Tier-2, hospital expansions are reaching fast: Hospitals under our coverage are aggressively scaling capacity to meet rising healthcare demand through both organic and inorganic expansion. Over the next two years: APHS plans to add over 2,500 beds, FORH will expand by 1,100+ beds, MEDANTA is targeting 1,000+ new beds, YATHARTH will add 700+ beds, MAXHEALT is expanding by 1,730 beds, and RAINBOW will add 380 beds. These expansions span both metro cities, driving higher ARPOB, and Tier-2 locations, catering to the growing demand for high-quality healthcare.

* ARPOB growth may start modest—but specialty, volume, and payor mix will ignite momentum: ARPOB growth may stay moderate (2–5% YoY) as new capacities typically take time to ramp up but should improve gradually with rising patient volumes, specialized services gaining traction, and a better payor mix.

* Specialty surge, oncology, and high-end surgeries driving ARPOB: Demand for specialized treatments like oncology and highend surgeries is rising, driving stronger ARPOB (which will be offset by the capacity expansion), shorter ALOS, and overall revenue growth. Oncology revenue share stands at 25.8% for MAXHEALT, 16% for NARH, 14.3% for FORH, 13.7% for MEDANTA, and 10% for YATHARTH. This shift toward high-end specialties is expected to continue across most companies under coverage.

* Medical Tourism expected to grow in the medium term: Medical tourism, which currently contributes ~5–7% of revenues, is poised to grow at nearly twice the industry average over the medium term. Key tailwinds include easing geopolitical tensions, the upcoming Noida airport, competitive treatment costs, and access to world-class care. This will continue to drive strong inflows of international patients, especially from Southeast Asia and the Middle East.

High - Conviction Investment Ideas

We continue to remain positive on Yatharth Hospitals and Apollo Hospitals Enterprise and expect to deliver strong growth in Q1FY26E.

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131