Fortis Healthcare Q4 Results Review - Hospital Margins Ascending: ICICI Securities

ICICI Securities Report

Fortis Healthcare Ltd.’s hospital division margin of 22.4% in Q4 FY24 was the best under the new management. It has recently divested two underperforming hospitals in Chennai to curtail cost. Focus on adding brownfield beds (2,200 beds in next four years) is likely to improve scale without denting profitability.

Occupancy in FY24 rose 200 bps YoY to 67% and is likely to touch 70% on the existing beds in Q1 FY25E. Rebranding of diagnostics arm to Agilus has taken a toll on diagnostic revenue growth and margins. The branding cost of Rs 310 million may reoccur in FY25E, a 5-7% price increase in B2C business (53% of sales) in Feb-24 can help it safeguard profitability.

We resume coverage on the company with Add rating and target price of Rs 500, valuing hospitals/diagnostics at 21 times/23 times FY26E enterprise value/Ebitda.

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