Synopsis:
Jefferies has released a report on the hospital sector, assessing growth potential, investor concerns around capacity expansion, and the financial ability of hospitals to add new beds while meeting increasing healthcare demand.
Jefferies report highlights investor worries over potential overcapacity despite strong balance sheets supporting 32,000 new bed additions. Jefferies clarifies that high bed density doesn’t imply overcapacity and ongoing demand may still exceed supply.
Jefferies on Hospitals
Jefferies in its latest note on the hospital sector, highlighted that potential overcapacity has emerged as a key concern among investors, driven by aggressive expansion plans across major hospital chains.
The brokerage noted that despite these concerns, the sector’s current balance sheet strength supports the addition of up to 32,000 new beds over the next five years, translating to a 7% compound annual growth rate (CAGR).
Jefferies pointed out that this capacity expansion might still fall short of meeting ongoing demand, given the rising healthcare needs and limited operational scalability. Importantly, they reported that capacity does not equate to operational beds. Furthermore, Jefferies emphasized that an optically high bed density which may seem like overcapacity.
Medanta plans to expand its capacity by 3,000 beds, up from the current 3,062 beds, aiming for a 15% CAGR. Max Healthcare intends to add 4,700 beds to its existing 5,360 beds, reflecting an 18–19% CAGR.
Fortis Healthcare is set to increase its capacity by 2,000 beds over the current 4,175 beds, targeting a 10% CAGR, while Apollo Hospitals plans to add 4,372 beds to its 10,187 bed base, corresponding to a 7.5% CAGR.
Jefferies’ positive outlook on Max Healthcare
The brokerage maintains a positive outlook on Max Healthcare Institute Ltd, noting that the company is poised for accelerated growth with the addition of new brownfield beds and the expansion of recently acquired units. Its aggressive strategy of acquiring new assets and increasing capacity continues to be unparalleled.
Max Healthcare Institute Ltd is one of India’s leading private healthcare providers, operating a network of multi-specialty hospitals across the country. The company offers comprehensive medical services, including advanced diagnostics, specialized treatments, and patient care, and is known for its focus on quality healthcare delivery, cutting-edge infrastructure, and expansion through new hospital units and acquisitions.
With market capitalization of Rs. 1,10,009 cr, the shares of Max Healthcare Institute Ltd are currently trading at Rs. 1,132.80 per share, from its previous close of Rs. 1,139.70 per share.
Written by Manideep Appana
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