Better patient mix to offset seasonal infection dip

Brokerages HDFC Securities and Kotak Institutional Equities peg overall sales growth for hospitals at 13-16% year-on-year (y-o-y), as new beds, steady average revenue per occupied bed (ARPOB), and a better patient case mix could offset the marginally seasonal dip.

“It has been a bit of a weak season, especially for dengue and malaria cases—you will see some impact of that on hospitals,” said Tausif Shaikh, pharma and healthcare analyst at BNP Paribas. “Floods in Punjab could impact some of the players specifically focusing on North India.”

While a sequential revenue uptick of 9% is expected, led by seasonality and new hospitals, “2QFY26 was not as seasonally strong compared with previous years, owing to lower incidences of infections,” said Kotak analysts in a 6 October note.

“Excluding these seasonal infections, volume growth for hospitals stayed healthy,” said the analysts. Kotak analysts expect Ebitda to grow 13% y-o-y for hospitals. Ebitda is earnings before interest, tax, depreciation and amortization, a measure of operating profitability.

The Ebitda margin of Apollo Hospitals is expected to expand due to reduced spending on its Apollo 24/7, while Aster DM, Max Healthcare, Medanta and KIMS could see margin pressure.

For Aster DM, slower growth in its key Kerala cluster could lead to margin decline while Max Healthcare may see pressure due to integration of low-margin acquired hospitals, said HDFC analysts.

For Apollo, the omnichannel pharmacy and retail businesses are expected to grow in double digits, while its hospitals business is expected to grow 8% on-year, according to both the brokerages.

“We expect HealthCo sales to grow 15% y-o-y, driven by growth in offline pharmacy distribution sales (+15% y-o-y),” said Kotak analysts. Apollo Health and Lifestyle Ltd, which includes verticals like primary care and diagnostics, is expected to grow 14% yoy, according to the brokerages.

Analysts are keeping an eye on management commentary on average revenue per bed (ARPOB) growth this quarter, said Shaikh of BNP Paribas.

Chains like Apollo, Max Healthcare, and Fortis are implementing previously announced expansion plans.

Volumes to drive diagnostics growth

HDFC analysts expect diagnostics companies to grow 15% y-o-y, driven by patient/test volume increases and inorganic activity, while network expansion and M&A-led costs could impact margins.

Excluding growth from mergers and acquisitions, organic growth for diagnostics firms is expected to be 12% y-o-y. “Network expansion, no major price hikes, and M&A-related costs to restrict margins,” said HDFC analysts in an 8 October note.

“We bake in 11% y-o-y sales growth for DLPL (Dr Lal Path Labs), aided by volume growth,” said Kotak analysts.

For Metropolis Healthcare, analysts expect 23% y-o-y sales growth driven by its four recent acquisitions. Organic growth for Metropolis is expected to be 12%.

“We expect a higher wellness mix for both companies to boost overall y-o-y sales growth,” said the analysts.