Rainbow Hospitals will report the lowest EBITDA per occupied bed at a CAGR of ~3 per cent while most others are expected to report 8-10 per cent EBITDA per occupied bed CAGR over FY2023-28E.
Turning the spotlight on per bed profitability as a metric to evaluate the health of healthcare institutions, Kotak Institutional Equities shed light on the financial performance of hospitals by examining the growth of EBITDA concerning the number of occupied beds. “In light of expansion plans over the next five years for most hospitals being known, compared to EBITDA growth, analyzing growth in EBITDA per occupied bed provides better clarity on trajectory of core profitability after factoring in the impact of bed expansion,” the brokerage firm said in a report.
Projections by Kotak Institutional Equities offer valuable insights into the expected growth rates of various hospitals. The report said that within its coverage, expectations are that Rainbow Hospitals will report the lowest EBITDA per occupied bed at a CAGR of ~3 per cent while most others are expected to report 8-10 per cent EBITDA per occupied bed CAGR over FY2023-28E.
For the India hospital segments in its coverage, Kotak Institutional Equities said, “We build in a 13-19 per cent sales CAGR and 12-21 per cent pre-Ind AS-116 EBITDA CAGR, over FY2023-28E for the India hospital segments of our coverage.” While it expected Rainbow Hospitals to report the lowest, KIMS Hospitals is expected to report the highest EBITDA per occupied bed CAGR on a relatively lower base. Meanwhile, Max Healthcare is forecasted to report a 9 per cent growth rate, while Apollo Hospitals, Narayana Health, and Aster DM Healthcare are all expected to fall within the 8-9 per cent range.
“As of FY2023, KIMS Hospitals had one of the lowest EBITDA per occupied bed metrics, post which we expect the company to deliver a healthy ~10 per cent EBITDA per occupied bed CAGR over FY2023-28E. We believe this would be aided by expansion in high ARPOB markets (Kondapur, Thane and Nagpur) compared to KIMS’ existing AP cluster,” it said.
On the other hand, Rainbow reported one of the highest EBITDA per occupied bed in FY2023. “Due to the upcoming greenfield expansion in Gurugram in mid-FY2027E and the resultant initial hit, we expect Rainbow to report the lowest EBITDA/occupied bed CAGR over FY2023-28E in our coverage,” it added. Despite Max’s industry-leading EBITDA per occupied bed in FY2023, the brokerage firm said that the company is expected to generate ~9 per cent EBITDA per occupied bed CAGR over FY2023-28E aided by gradual reduction in institutional bed mix. “We expect a similar 8-9 per cent EBITDA per occupied bed CAGR over FY2023-28E for Apollo Hospitals, Narayana Health, and Aster DM Healthcare,” the report said.
In response to the analysis, the brokerage firm said, “We roll forward to September 2025E, keeping our estimates unchanged, and downgrade KIMS and Aster DM to REDUCE (from BUY) and ADD (from BUY) given the recent sharp run-up in the stock prices. While we stay constructive on the hospital space led by a healthy EBITDA and FCF outlook over the medium term despite ongoing expansion, given the elevated valuations we stay very selective. APHS and Medanta are our preferred picks in the healthcare services space.” The Financial Express