Shares of Max Healthcare Institute rose almost two per cent to hit their fresh all-time high of ₹532.95 in intraday trade on BSE on May 18. The stock has been enjoying strong bullish sentiment for quite some time now. In May so far, the stock has gained around 15 per cent against a per cent gain in the equity benchmark Sensex.
Shares of one of the largest private-sector healthcare services companies in India have been gaining traction of late because of several positive triggers.
Recently Morgan Stanley Capital International (MSCI) announced the inclusion of this stock in its India Standard Index. Inclusion in the MSCI India Standard Index is seen as positive as it is tracked by many index funds and exchange-traded funds (ETFs) as a benchmark.
As per brokerage firm Nuvama Alternative & Quantitative Research, the inclusion of Max Healthcare Institute in the MSCI Index will lead to an inflow of $295 million into the stock.
Apart from this, the strong March quarter performance of the company has also given a boost to the stock.
In a BSE filing on May 16, the company said its profit after tax (PAT) for the March quarter of FY23 (Q4FY23) jumped 85 per cent year-on-year (YoY) to ₹320 crore against ₹172 crore in the corresponding quarter of the previous financial year, primarily on account of improvement in the operating metrics in all the hospitals and reduction in finance costs.
The company’s net revenue for the said quarter rose 27 per cent YoY to ₹1,551 crore while operating EBITDA saw a 44 per cent YoY jump to ₹437 crore. EBITDA margin rose to 28.2 per cent in Q4FY23 against 24.9 per cent YoY.
Brokerage firm Motilal Oswal Financial Services maintained a buy call on the stock after the Q4 numbers, pegging the target price of ₹600.
The brokerage firm underscored that Max Healthcare delivered a marginally better-than-expected operational performance in Q4FY23, aided by a steady improvement in average realization per operating bed and an increased number of patients treated.
The brokerage firm believes the company’s growth prospects remain robust on the back of price hikes, optimisation of payor mix/case mix, and bed additions. Surplus cash provides scope for inorganic growth opportunities.
Motilal raised its earnings estimates by 6.5 per cent and 6 per cent for FY24 and FY25, respectively, factoring in (1) a tariff increase for patients from PSUs, (2) a faster ramp-up in occupancy for recently added beds at Shalimar Bagh, (3) ongoing cost management, and (4) scale-up in the non-captive pathology business.
“We remain positive on Max Healthcare Institute on the back of (1) significant land bank available in high demand areas of Delhi for brownfield expansion, (2) focused approach to improve profitability per bed, and (3) proven capability of a strong turnaround of hospital assets,” said Motilal Oswal.
Pravesh Gour, Senior Technical Analyst at Swastika Investmart observed that the stock has witnessed a breakout of a long consolidation range, which means a counter breaks above a significant resistance level or a consolidation range.
“A breakout from a long consolidation range suggests that the counter’s price has overcome a period of sideways movement and is now poised for potential upward momentum,” Gour explained.
“It is taking support from the important averages and continuing its rally towards new all-time high levels. The counter is having a very bullish chart as it is forming higher highs and higher lows for formation. MACD (moving average convergence divergence) is supporting the current strength, whereas the momentum indicator RSI (relative strength index) is also positively poised,” said Gour.
“The range of ₹550–560 is identified as an immediate hurdle for the counter. This suggests that the price may face resistance in surpassing this level. However, if the counter manages to break above this range, it could indicate further upward momentum with a potential target of ₹600 or higher, while the level of ₹770 is identified as an important support level for the counter,” Gour said.
While the long-term outlook of the stock appears positive, some technical analysts recommend booking some profit in the stock at this juncture.
Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers pointed out that the stock has gained strongly in the last one month so one can consider booking some profit in the short term.
Patel highlighted that on a weekly scale, a bearish butterfly pattern has emerged near the ₹540 level along RSI weekly displaying negative divergence where price action is making higher highs and RSI weekly is not making higher highs which is a matter of concern.
“One should book profit in the zone of ₹530-545 levels and avoid fresh longs as of now,” said Patel. LiveMint