Q2FY25-Seasonally a strong quarter

A quarterly preview of leading listed hospitals anticipates that hospital companies covered will post healthy EBITDA growth of 19 percent and a 100-700bps QoQ improvement in occupancy.

Seasonally, Q2 is a strong quarter for hospitals, given higher incidences of dengue and airborne diseases, which increase patient admissions. In its quarterly preview, Prabhudas Lilladher anticipates that hospital companies covered will post healthy EBITDA growth of 19 percent and a 100-700bps QoQ improvement in occupancy. On a YoY basis, the occupancy trend is a mixed bag. A sharp QoQ improvement in occupancy for Krishna Institute of Medical Sciences (KIMS) and Jupiter Life Line Hospitals, aided by seasonality and ramp-up of new units, is expected. ARPOB is anticipated to remain healthy, helped by improving the case and payor mix.

Hospital companies are expected to post 19 percent YoY growth (14 percent QoQ) in post IND AS EBITDA (~15 percent YoY EBITDA growth ex of ₹1.4 bn loss in Apollo 24×7) in Q2. The brokerage remains structurally positive in the hospital space and expects momentum to continue in H2FY25 with further improvement in occupancy, better case mix, and new capacity additions.

Strong performance in hospital seasonality
The Apollo Hospitals Enterprise Limited hospital segment will likely report 12 percent YoY growth aided by higher ARPOB and better margins. Max Healthcare will likely continue to report healthy 14 percent YoY growth in EBITDA, led by the ramp-up in Lucknow and Nagpur units, but partly dilutive because of the Dwarka unit operationalized in Q2.

Narayana Hrudayalaya Limited’s India hospital EBITDA is expected to grow 12 percent YoY, while Cayman will report steady EBITDA growth of ~6 percent YoY. On a consolidated level, 7 percent YoY (~9 percent QoQ) growth in EBITDA is expected. Losses from Narayana Health Integrated Care will continue to remain elevated. ₹140mn losses have been factored in from the Narayana Health Integrated Care subsidiary.

Krishna Institute of Medical Sciences is anticipated to report 19 percent YoY (17 percent QoQ) growth in EBITDA, aided by a substantial ramp-up in Sunshine and Nagpur units. The Nashik unit is set to be commercialized in Q3.

Jupiter Life Line Hospitals, is anticipated to report strong 19 percent YoY growth aided by increased ARPOB resulting from a better payor mix and occupancy scale-up across units.

Given improved operational efficiency and higher occupancy, Healthcare Global Enterprises expects a substantial 19 percent YoY growth in EBITDA. Overall, EBITDA is expected to cross the ₹1 bn mark for the company for the first time.

Aster DM Healthcare should report another strong quarter, with 26 percent YoY EBITDA growth for its India business. A ramp-up at the Whitefield unit is expected in Q2.

24×7 losses to reduce QoQ in APHS
Apollo Hospitals Enterprise will likely report 26 percent YoY growth in post-IND AS EBITDA, aided by reduced losses from 24×7. ₹1.4 bn losses (including ESOP) from 24×7 vs ₹1.5 bn in Q1FY25 and ₹2 bn in Q2FY24 have been factored in. Adjusting for these losses, a ~13 percent YoY growth in EBITDA for APHS is expected.

Fortis Healthcare hospital business is likely to see 25 percent YoY EBITDA growth due to better operating leverage. Its diagnostic business is expected to see muted profitability YoY given higher branding cost. Overall, a ~20 percent YoY EBITDA growth is anticipated.

Top Picks
Max Healthcare Institute. Max has shown phenomenal growth despite negligible capacity additions in the past two years. A pick-up in the growth momentum is expected given robust expansion plans (+3,000 additional beds over FY24-27E), improving payor mix, and bolt-on acquisitions like recently added units in Lucknow, Nagpur, and Noida.

Jupiter Life Line Hospitals’ operational efficiency has been vital in the competitive markets of Mumbai Metropolitan Region. Strategic greenfield expansions in densely populated micro-markets in the western region, scale-up in occupancy, and improving margins, are expected to aid growth momentum over the medium term.

Krishna Institute of Medical Sciences’ recent acquisitions of Sunshine, Nashik, and Nagpur units are value accretive, and an expansion plan of +1,800 beds over the next 2-3 years will sustain growth momentum. Additionally, though FY24 witnessed muted EBITDA growth, new clinical talent hiring and the addition of subspecialties across Telangana units will help ramp up revenues and profitability from FY25, the brokerage adds.