Top Conviction Ideas : Buy Fortis Healthcare Ltd for Target Rs. 1,000 - Axis Securities Ltd
* Strong Q1 Performance: Fortis Healthcare reported revenue of Rs 2,167 Cr, which is in line with expectations and supported by higher ARPOB and improved occupancy levels. ARPOB stood at Rs 72,603, up 10% YoY, while occupancy improved to 69% (up 200 bps YoY), driven by an 8.4% YoY growth in occupied bed days. The Hospital Segment’s EBITDA margins stood at 22.1% with 41.5% EBITDA growth over the year. The company’s topline grew by 16.6% YoY, while overall EBITDA margins stood at 22.6%, up 440 bps YoY and 95 bps QoQ. The reported PAT was Rs 267 Cr, including an exceptional gain of Rs 13 Cr. Adjusted PAT grew 46% YoY, driven by operational efficiencies and cost control.
* Agilus Diagnostics Delivers Improved Profitability: The rebranded Agilus Diagnostics reported revenue of Rs 329 Cr, growth of 6.5% YoY, and an EBITDA of Rs 85 Cr, reflecting a 25.8% margin, up 800 bps YoY. The margin improvement reflects operational recovery and efficiency gains as the business continues to scale post-rebranding
* Aggressive Capacity Expansion: Fortis plans to add approximately 900 beds in FY26, including capacity from the recently acquired Shrimann Super Speciality Hospital in Jalandhar. Around 50% of these beds are expected to be commercialised within the current financial year, with the remainder contributing to revenue from FY27 onwards. The expansion will primarily be brownfield in nature, focusing on existing hospitals. Key additions include 250 beds at the FMRI Gurugram unit, expected to be completed by year-end but not contributing meaningfully to FY26 revenues, 150 beds at the Noida facility, 50 beds in Faridabad, and a ramp-up of 200 beds at the Manesar location. Overall, at least 600 beds are expected to begin revenue contribution in FY27. Additionally, Fortis has entered into an operations and maintenance agreement with Gleneagles India, under which it will manage 700 beds across five hospitals, earning a 3% net revenue service fee. This arrangement is expected to contribute approximately Rs 30 Cr directly to EBITDA.
* Outlook: Fortis Healthcare remains focused on a profitable growth trajectory, leveraging brownfield expansions, operational efficiencies, and portfolio optimisation. The company targets 14-15% revenue growth in the hospital business, with ARPOB expected to grow at 5-6% YoY. Management reiterates its margin expansion guidance of 200 bps for FY26, also driven by higher occupancy and improvements in the speciality mix. Strategic initiatives such as the acquisition of the Fortis brand, expansion in key clusters (notably Punjab and NCR), and investment in advanced medical technology are expected to further strengthen Fortis’s market position
For More Axis Securities Disclaimer https://simplehai.axisdirect.in/disclaimer-home
SEBI Registration number is INZ000161633
