HSBC High on Hosps; Retains Buy on Apollo, KIMS

HSBC retained its ‘Buy’ rating on Apollo and KIMS and raised the price targets on Rainbow and Aster with a significant capex cycle underway for hospitals in India in 2025.

The brokerage said structural drivers such as an ageing population, an increase in lifestyle-related disorders and rising health insurance coverage remain intact for the growth of hospitals.

“Despite significant bed additions, we do not see an excess supply issue, even in the micro markets within a city (e.g., Bengaluru), as demand remains unmet,” said analysts at HSBC in a note.

Out of the brokerage’s coverage universe, seven hospitals plan to add 16,000 beds over the next 3 to 5 years, which is four times the number of beds added between FY19 and 24.

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The brokerage said that they prefer hospitals that are expanding capacity without much drag on margins and that can improve occupancy, average revenue per occupied bed and payor mix.

“We do not assume any major risk for Apollo 24/7 (Apollo’s digital health platform) on the purported entry of quick-commerce players in the online pharmacy space,” said HSBC in the report.

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