Renowned brokerage firm Kotak Institutional Equities has recently turned its spotlight on a particular metric that is often overlooked when evaluating the health of healthcare institutions: per bed profitability. This novel approach aims to shed light on the financial performance of hospitals by examining the growth in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) concerning the number of occupied beds. The question they seek to answer is: how much EBITDA does each occupied bed generate?
According to Kotak Institutional Equities, analysing EBITDA per occupied bed provides a more insightful perspective on the improvement in core profit, especially when considering the impact of bed expansion. By delving into this metric, they hope to offer a comprehensive view of hospital performance and potential investment opportunities.
Kotak Institutional Equities has put forth its estimates for EBITDA per occupied bed, spanning the financial years 2023 to 2028. These projections offer valuable insights into the expected growth rates of various hospitals. It’s anticipated that most hospitals will report a compounded annual growth rate (CAGR) ranging from 8 percent to 10 percent per occupied bed.
Rainbow Childrens Medicare, however, emerges as an outlier with a projected growth rate of around 3 percent, making it one of the lowest performers in this analysis. On the opposite end of the spectrum, Krishna Institute of Medical Sciences (KIMS) is expected to shine with a CAGR of 10 percent, making it one of the highest performers. Meanwhile, Max Healthcare Institute Limited is forecasted to report a robust 9 percent growth rate, while Apollo Hospitals Enterprises, Narayana Hrudayalaya, and Aster DM Healthcare Ltd are all expected to fall within the 8-9 percent range.
In response to their analysis, the brokerage firm has taken specific actions concerning their recommendations for investment in healthcare stocks.
The brokerage firm has downgraded Aster DM from a ‘buy’ rating to ‘add’. However, it’s worth noting that the target price for Aster DM remains higher at around Rs 355, suggesting that there is still growth potential, albeit at a slightly more conservative level.
Kotak Institutional Equities has downgraded KIMS from a ‘buy’ to ‘reduce’. Yet, the target price for KIMS stands at Rs 2,020, indicating that despite the downgrade, the stock still has value in their estimation.
The brokerage firm has issued a ‘reduce’ call for both Rainbow and Narayana, implying a more cautious outlook for these stocks.
Kotak Institutional Equities maintains a ‘buy’ recommendation for Apollo Hospitals, indicating their confidence in its growth prospects. They also suggest adding Medanta to the portfolio, giving it an ‘add’ rating. CNBCTV18