SPA Securities' report on Fortis Healthcare
Fortis Healthcare Limited, an IHH Healthcare Group Company, is the leading healthcare organisation in the country with 36 healthcare facilities, 3,700 operational beds and over 400 diagnostics centres. Hospital business is well positioned to return to profitability with strong industry tail. Hospital capacity expansion of 1300 beds spread over the next five years with healthy utilization will post revenue growth of 6.5% in FY20-23 and EBITDA margin expansion to 16%. Diagnostic business is ripe for strong decadal growth as spend on preventive tests increases, organized players gaining market share. SRL offers a comprehensive range of investigations in pathology and imaging over 3,700 diagnostic tests, expected to grow revenue by 8% in FY22/23 along with 120 bps margin expansion by FY23.
Outlook
We initiate Fortis Healthcare with a BUY recommendation and a target price of INR 200, valuing hospital business at 17x of FY23 EV/EBITDA and diagnostic business at 35x of FY23 EV/EBITDA.
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