Fortis, Max, Medanta, Apollo shares dip 13.5% in one month

While the Supreme court of India has directed the Health department to present a concrete proposal regarding the rates chargeable from patients before the next hearing (six weeks from 27th February), analysts at Motilal Oswal Financial Services, said that considering the substantial investments made by hospitals in building infrastructure and acquiring talent resources, imposing a ceiling on prices aligned with Central government healthcare Scheme (CGHS) rates could potentially undermine the investment ecosystem within the healthcare services sector.

Therefore though the overhang may persist nevertheless most analysts do not expect major pricing caps introduced across the board.

Analysts at HSBC Securities and Capital Markets (India) Private Limited said that in view of challenges for implementation, this appears more like a near-term headline risk though it can’t be dismissed.

While these regulatory clouds may take some time to settle, HSBC analysts remain positive on the growth outlook for the hospitals sector and like Apollo Hospitals among covered hospital names.

Analysts at Elara Securities (India) Pvt ltd post various management interactions said that “most managements remain concerned about the recent Supreme Court directive on pricing regulation of healthcare services, none expect the government to implement a draconian price control regime that can kill the private healthcare industry. All the managements expect some sort of price regulation to come into effect.

Elara Analysts however remain cautious on stocks considering valuations, they re trading at. They said that although they do not see a major deterioration in strong momentum, they see softening of growth and margin in the next 2-4 quarters. In their view, all-time high valuations do not price this in.

Those at Motilal Oswal Financial Services said that Hospitals stocks have corrected by 7-14% over the past week, following an order from the Supreme court of India. However MOFSL analysts continue to believe in the structural tailwinds of the hospitals sector, as healthcare services continue to remain inadequate across various parts of India. The growing health awareness, rising incidences of illnesses, and increasing insurance penetration pave way for higher investment opportunities for delivering improved healthcare services.

They believe Max healthcare, Medanta, and Apollo hospitals are well-positioned to provide the healthcare services. LiveMint