HDFC Securities sees 15% upside in Fortis Healthcare

Fortis Healthcare share price added over 2 percent in the morning trade on June 10. The company and other hospital stocks are in focus after Prime Minister Narendra Modi on June 7 announced free coronavirus vaccination for all aged above 18, with the Centre bearing the cost.

Modi said the Centre would procure 75 percent of the vaccines, while the private sector would be allowed to purchase the remaining 25 percent of the jabs. The government has also capped the service charge at Rs 150 a dose for private hospitals administering the vaccine.

According to experts, this is largely negative for private hospitals and could impact their profitability.

But, Fortis Healthcare was trading at Rs 235.30, up Rs 4.30, or 1.86 percent. It has touched an intraday high of Rs 236.70 and an intraday low of Rs 229.50. The stock, which returned almost 100 percent in the last one, year has been trading flat over the month.

According to HDFC Securities, Fortis Healthcare is well-positioned to capitalise on the positive outlook for healthcare services—better affordability, widening medical insurance coverage, growing healthcare awareness and government boost.

With its corporate governance issues behind it, the association of FHL with IHH has provided an opportunity to gain from international experience and world-class standards in patient care.

Under the new management, Fortis Healthcare undertook a comprehensive strategic review and prioritised key areas that would drive revenues and operational performance, it said.

The brokerage firm has a buy on the stock on dips around Rs 199-200, with a target price of Rs 271 a share in the next two quarters, an upside potential of 15 percent.

Fortis Healthcare is a good bet on the structural long-term growth story of the Indian healthcare and diagnostics industry as it has established its presence across verticals, quality testing capabilities and structural changes under the new management, the brokerage said.

It is giving all the three approved vaccines with a monthly capacity of administering 6 lakh doses and is charging a fee in the Rs 150-300 range with more than 60 percent margin.

“We believe the base case fair value of the stock is Rs 249 (39.5x FY23E EPS, 16.8x FY23E EV/EBITDA) and the bull case fair value of the stock is Rs 271 (43x FY23E EPS, 18.3 FY23E EV/EBITDA) over the next two quarters. Investors can buy the stock at LTP and add on dips to Rs 199-200 band (31.5x FY23E EPS, 13.2x FY23E EV/EBITDA). Moneycontrol