The brokerage house Jefferies said that given the earnings outlook of the hospital stocks, any weakness in them should be looked at as a buying opportunity. With Max Healthcare as its top pick in the sector. It has a Buy rating on the stock with a target price of Rs 1,380. The other key stocks Jefferies is betting on include Fortis Healthcare, Apollo Hospitals, and Medanta (Global Health).
Jefferies on hospital stocks: Correction a buying opportunity
According to Jefferies, the hospital stocks saw swift correction driven by negative newsflow around the company, price standardisation, and raised bed allocation. However, it was insignificant as investors realised it soon. “We believe recent newsflow of Adani Group entering healthcare is unlikely to alter the competitive landscape as feared; weakness in stocks should be used as a buying opportunity, given resilient earnings outlook,” said Jefferies in a research note.
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Adani Group is expected to enter the hospitality sector with two non-profitable multi-speciality hospitals and medical colleges in Mumbai and Ahmedabad of 1,000 beds. This news has driven some correction in the stock prices of listed hospital companies. Max Healthcare has its major business in Mumbai and Adani Group will launch its 1,000-bed hospital in the same city. Jefferies turned down any negative impact on Max Healthcare’s EBITDA as it feels Mumbai has enough headroom to accommodate new beds.
Jefferies on hospital stocks: Price standardisation already taken care of
Also, all the stocks a year back declined after a public interest litigation (PIL) for price standardisation for healthcare services in the Supreme Court was filed. However, the share prices soon recovered as investors assessed that standardising prices is almost impossible to impose.
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