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In Q1FY25, Fortis’ performance was in line with our expectations. Consolidated revenue stood
at INR 18.6 bn, reflecting a growth of 12.2% YoY and 4.1% QoQ. The hospital business
contributed INR 15.5 bn, showing a growth of 14.4% YoY and 4.0% QoQ, while the diagnostics
business reported INR 3.4 bn, up 13.4% YoY and 15.7% QoQ. ARPOB/day grew by 9.7% YoY and
3.7% QoQ to INR 65,924. Occupancy levels were at 67% compared to 64% last year. EBITDA
reached INR 3.4 bn, increasing by 25.7% YoY but declining by 10.1% QoQ. The EBITDA margin
was 18.4%, which expanded by 199bps YoY but contracted by 291bps QoQ, primarily due to a
13.8% decline in hospital EBITDA (margin at 18.5% vs 22.3% in Q4FY24). The diagnostic business
reported a 6.5% increase in EBITDA (margin at 16.1% vs 17.5% in Q4FY24).

? Hospital Business: Hospital business revenue growth was driven by a 9.7% YoY increase in
ARPOB and higher occupancy compared to Q1FY24. The hospital business also benefited from
a 15.7% growth in revenue from the company’s top six key medical specialties—Oncology,
Gastroenterology, Neurosciences, Renal Sciences, Orthopedics, and Cardiac Sciences—in
Q1FY25 compared to the same period last year. These specialties consistently contributed 63%
to the overall hospital business revenues, similar to Q1FY24. Revenues from medical travel
grew 11% YoY for the quarter, contributing 8% to the overall hospital business revenue,
consistent with Q1FY24. Key facilities such as Mulund, Anandpur, BG Road, Shalimar Bagh,Amritsar, Mohali, FMRI, and Noida each achieved over 20% growth. The surgical to non-
surgical revenue ratio was 61:39. Hospital operating EBITDA was INR 2,870 mn with an 18.5%margin, showing an increase in contribution from 75.7% last year to 83.8% in Q1FY25. The
company has maintained its hospital business EBITDA margin guidance at over 20%.

* Diagnostic Business: Agilus' performance was impacted by a rebranding exercise undertaken
in May 2023. However, operating EBITDA margins (based on gross revenues) in Q1FY25
improved compared to the previous quarter's margins of 14.0%, primarily due to cost
optimization initiatives. The preventive portfolio revenues grew by 13% in Q1FY25,
contributing 12% to operating revenues, up from 10% in Q1FY24. The average realization per
test was INR 340, and the per-patient revenue was INR 845. The company expects Agilus'
growth to continue throughout the year and align with industry growth by FY26.

* EBITDA Margin Guidance: The margin improvement from 16.4% in Q1FY24 to 18.4% was
driven by increased ARPOB, higher occupancy, and a shift in the specialized mix. The company
expects this gradual recovery to continue in FY25. Management projects an EBITDA margin
improvement of 200 basis points (slightly better in the hospital business) and anticipates a
25% increase in bed growth over the next two to three years.

* Outlook and Valuation: We anticipate a subdued growth due to several factors: a single-digit
ARPOB increase compared to historically higher double-digit growth, 4-5 hospitals not
operating as expected, ongoing rebranding expenses for Agilus in FY25 (which will impact
margins), and slow growth in Agilus for the current fiscal year. We value the stock based on the
SOTP methodology to arrive at a price target of INR 497 and maintain a REDUCE rating.

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