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Strong Q4FY25 Results expected: Healthcare companies under coverage are expected to end the year on a good note and continue in FY26. We anticipate our coverage companies to report robust double-digit growth in revenues (~21% YoY on average), considering one of the best quarter for the industry, primarily driven by improved occupancy levels due to the execution of elective surgeries, capacity expansions, and improvement in the share from international patients. ARPOB (Average Revenue Per Occupied Bed) growth is expected to be moderate. Except for Rainbow, occupancy is expected to increase in the entire sector. EBITDA growth is expected to align with revenue performance and grow by 19.3% on average of the coverage universe. Hospital sector is a defensive play considering there won’t be any impact of Trump’s proposed Tariff, as it generated revenue domestically.

Factors Driving Long-term Growth:

* Majority of the companies are under capacity expansion phase: Hospitals under coverage are undergoing significant capacity expansions to address growing demand through organic and inorganic growth. Over the next 2 years, NARH plans to add 1,500 beds via greenfield projects, MEDANTA 750 beds, YATHARTH over 700 beds, MAXHEALT 450 beds, and RAINBOW 130 beds, among others. These expansions are not only focused in metro cities that boost ARPOB but also tier-2 cities addressing the growing demand for affordable yet high-quality healthcare.

* Moderate ARPOB growth due to capacity expansion: With companies adding new facilities and beds, ARPOB growth can be moderate (2-5% YoY). Gradually improvements shall be seen as patient volumes and specialized services increase with an optimized payor mix

* Demand for Specialized Services is moving towards North direction: There is a rising demand for specialized treatments, including oncology and high-end surgical procedures. Oncology revenue share of a few companies are APHS and NARH at 17%, FORH at 16%, MEDANTA at 13%, and YATHARTH at 10%. This trend is contributing to higher ARPOB and overall revenue growth. Companies like MAXHEALT, FORH, APHS, MEDANTA will continue to see shift in the specialty mix towards high-end services.

* Medical Tourism expected to grow in the medium term: Accounting for ~5- 7% of revenue, medical tourism is expected to grow at nearly double the overall rate in the mid-term. Factors such as normalization in the geo-political issue, operationalization of a new airport in Noida, affordable treatment costs, worldclass facilities, and skilled medical personnel will continue to attract international patients, particularly from Southeast Asia and the Middle East. Companies like APHS and NARH may continue to face political uncertainly but others will see come recovery in the quarter.

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