Fortis Healthcare shares in focus post positive Q3 results — Citi sees 22% upside

Shares of Fortis Healthcare Ltd. are in focus on Monday, February 16 as the company reported positive earnings and brokerage firm Citi indicated a 22% upside on the stock post the third quarter results.

Citi has a 'buy' rating on the stock with a target price of ₹1,120 per share.

Fortis' revenue growth in the third quarter was steady as it increased 17.5% to ₹2,265.02 crore from ₹1,928.26 crore in the previous year.

It was also operationally strong as its margins improved to 22.3% from 19.5% in the year-ago period.

The company's profit declined 21.9% to ₹193.73 crore from ₹247.9 crore in the previous year. Its earnings before interest, tax, depreciation and amortisation (EBITDA) was at ₹505.66 crore, up 34.8% from last year's ₹375.12 crore.

Citi said the diagnostics business maintained good traction, reporting an 8.3% revenue growth and 18% adjusted EBITDA growth from the previous year.

Diagnostics were strong as well. Its diagnostics revenue increased 8.3% to 371 crore from ₹342 crore in the previous year. Operational EBITDA was up 73.5% to ₹86 crore from ₹49 crore in the previous year. Margins expanded to 23.1% from 14.4% in the year-ago period.

Citi said Fortis demonstrated consistent execution with strong hospital performance in the third quarter — with 19% and 29% revenue and EBITDA growth, respectively, in a seasonally-weak quarter.

Fortis' hospital revenue increased 19.4% to ₹1,938 crore from ₹1,623 crore in the previous year. Its operating EBITDA was up 28.9% to ₹420 crore from ₹325 crore last year.

Citi said the hospital segment's EBITDA margins expanded by 200 basis points from the previous year, suggesting a much sharper expansion in existing units, given that new units are margin-dilutive. Fortis' margins increased to 21.7% from 20% in the previous year.

Hospital occupancy was flat at 67%. Its average rate per occupied bed was at 2.56 crore compared to 2.45 crore per annum in the previous year.

Fortis' revenue contribution from preventive portfolio increased to 12% in the third quarter from 10% in the same period of the previous fiscal. Meanwhile, the contribution from specialised portfolio increased to 35% from 33% in the corresponding previous quarter.

Of the 17 analysts that have coverage on the stock, 13 have a 'buy' rating and four have a 'hold' rating.

Shares of Fortis Healthcare ended the previous session 1% lower at ₹919 apiece. The stock has gained 50% in the past year.

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