Mumbai: Smaller listed hospital chains have outrun their bigger peers on the bourses in recent months. Stocks of mid-cap hospital companies such as Kovai Medical Centre, Artemis Medicare Services and Indraprastha Medical Corp have more than doubled in the past one year and that of Dr. Agrawal’s Eye Hospital has risen by 74 per cent .
The newer players, such as Yatharth Hospital and Jupiter Life Line, have gained 58 per cent and 25 per cent , respectively, since their listings. Not just hospitals, even medical insurance administrator Medi Assist, that works with hospitals, has also gained 28 per cent since its listing in January this year.
Strong operational performance along with expansion plans, PE-backed buyouts underway in the sector and increased investor interest hunting for value in the listed healthcare space has led to smaller, regional players gaining ground on the Street.
For instance, Delhi NCR-based Artemis Medicare Services has gained 68 per cent in the past six months. The company’s net profit for the quarter ended June rose 70 per cent over the previous year level. It raised ₹330 crore from International Finance Corp (IFC) for funding its expansion plans. Similarly, Coimbatore-based Kovai Medical Centre reported a 47 per cent jump in net profit and 15 per cent increase in net sales. It is set to enter the Chennai market with a recent acquisition of a plot in the city. Yatharth Hospital posted a 37 per cent jump in net sales and 60 per cent rise in net profit for the latest quarter ended June 2024. Dr. Agarwal’s Eye Hospital chain posted a 22 per cent increase in net profit and 27 per cent growth in net sales for the quarter to June.
Most of the mid-sized hospital chains have grown beyond the issues that are faced by small sized doctor-owned hospitals. They are in an expansion mode – often foraying into under-served areas in tier 1 & 2 cities. They have been improving their average revenue per operating bed through cost efficiencies, use of technologies such as robotics and through harnessing economies of scale. This makes them ripe targets for acquisition by the leading hospital chains through funding by private equity. For instance, Aster DM Healthcare’s merger with Care Hospitals is backed by PE major Blackstone.
However, the recent run-up in case of some mid-cap hospital companies have pushed their valuations higher than their larger peers. For instance, the stocks of Jupiter Life Line, Yatharth Hospital and Artemis Medicare Services are trading at PEs that are higher than those of Fortis Healthcare, Global Health (Medanta) and KIMS. Such stocks are no longer a value buy.
