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News Topical, Digital Desk : Shares of Fortis Healthcare Ltd. saw a modest rise on Friday, April 24. This rise came after brokerage firm Motilal Oswal Financial Services initiated coverage on the stock with a 'Buy' rating.
The brokerage has set a target price of ₹1,100 for the company, which implies a potential upside of around 19% from the previous closing price. Meanwhile, in its 'bull case', the brokerage expects the stock to reach ₹1,260, implying an upside of approximately 36%.
What has changed in the company? According to Motilal Oswal, after passing on promoter ownership to IHH Healthcare in FY19, Fortis Healthcare has transformed into a professionally managed healthcare platform. This transformation has been supported by balance sheet improvement and exit from non-core businesses.
The company's financial performance has also seen significant improvement over the past few years. Revenue and EBITDA are expected to grow from ₹4,500 crore and ₹200 crore, respectively, in FY18 to an estimated ₹9,000 crore and ₹2,050 crore by FY26, with the company returning to profitability.
EBITDA has grown at a CAGR of 33%, primarily driven by capacity expansion and operational efficiency. The company is adding 400-500 beds annually due to strong internal accruals.
What are the expectations?
The brokerage also noted a recovery in Agilus Diagnostics, where growth and margins are improving. Motilal Oswal expects EBITDA and PAT to grow at a CAGR of 17% and 22%, respectively, during FY26-FY28.
In terms of valuation, the brokerage values the hospital business at 30x EV/EBITDA and the diagnostics business at 23x. This valuation is in line with peers like Max Healthcare and Apollo Hospitals. Strong execution, brownfield expansion, and better return ratios are cited as key reasons for this.
On Friday, Fortis Healthcare shares were trading at ₹923.95, down 0.30%. However, the stock has gained around 3% so far this year.
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