Fortis Health's prospects healthy on improved hospitals, diagnostics biz outlook

14 Apr , 2021 By : Kanchan Joshi

MUMBAI: Shares of Fortis Healthcare Ltd have been in focus with ace investor Rakesh Jhunjhunwala raising his holdings in the company to 4.31% from 2.65%. The stock has risen more than 29% in so far this year. Improving outlook for the hospitals and diagnostics business have also boosted the stock's prospects.

Rising patients' footfalls at hospitals and clinics and also an increase in surgeries have been key and led to a reversal in fortunes for the hospitals business. At Fortis, efficiency has also seen an uptick with a new management in place, feel analysts and expect better utilisation of hospital assets to drive gains for the company.

Hospital business will continue to see strong recovery sequentially with non-covid revenue improving, said analysts at Elara Securities (India) Private Limited. Though revenue from overseas patients will remain subdued for a while due to travel restrictions. Given an increase in occupancy, ramp-up in elective surgeries, better product mix and cost savings initiatives, analysts at Elara expect hospitals in their coverage universe to report EBITDA growth of 12% YoY and 8% sequentially during Q4.

Fortis Healthcare's is revenues will likely grow 9.6% year-on-year, with operating profits expected to surge 62.3%, indicating improved efficiencies. Analysts added that Fortis is also likely to report strong growth led by higher profitability in its diagnostics business.

SRL Diagnostics is expected to have seen a robust growth led by significant improvement in non-covid business during Q4. Covid testing revenues, meanwhile, will continue to support growth.

Organised laboratories are also seen benefitting from the shift away from unorganised players. Besides the environment has also given options for inorganic growth. SRL too has acquired the balance 50% stake in DDRC SRL Diagnostics Private Limited, its joint venture partner from Kerala. This will strengthen its presence in the southern states of Kerala, Tamil Nadu and Karnataka. The rising prospects of SRL are to help improve the earnings outlook for Fortis too.