Fortis Q3 Results Review - Inline Hospital Ebitda; Margin, Occupancy To Scale Up: Prabhudas Lilladher

Prabhudas Lilladher Report

Fortis Healthcare Ltd.'s Q3 FY24 hospital Ebitda was in-line with our estimate. Though hospital margins saw 150 basis points YoY improvement in Q3, we see further margin improvement in hospital segment aided by-

1. improving case and payor mix,

2. cost rationalisation initiatives and

3. divestment of nonprofitable assets.

Our FY25E and FY26E hospital Ebitda stands increased by 4-5%. We expect 19% Pre IND AS Ebitda compound annual growth rate over FY24-26E. At current market price, stock is trading at 21 times enterprise value/Ebitda on FY25E, adjusted for Agilus stake.

Maintain ‘Buy’ rating with revised target price of Rs 480/share (Rs 400 earlier); valuing hospital segment at 22 times and diagnostic at 20 times EV/Ebitda on FY26E. Resolution of legal issues and timely IPO of Agilus would be a key additional trigger for re-rating.

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