India healthcare sector sees revenue growth of 12.6% in Q1 FY25: BNP Paribas

The Indian healthcare sector is expected to grow in the first quarter of fiscal 2025 with a projected year-on-year (YoY) revenue growth of 12.6%, driven by a 15% increase in hospital revenue and a 12% increase in diagnostic revenue, according to brokerage firm BNP Paribas Securities India Private Limited.

Key players in the sector such as Apollo Hospitals Enterprise (APHS) and Fortis Healthcare (FORH) have been singled out for their projected performance. The report said both institutions are expected to achieve a 6% YoY growth in average revenue per operating bed (ARPOB). Apollo Hospitals is maintaining a stable occupancy rate of 62%, while Fortis Healthcare is targeting to increase its occupancy rate by 100 basis points to 65%.

“We are forecasting a stable quarter for our Indian healthcare footprint, with total revenue growth of 12.6% YoY. Hospitals is the main driver with growth of 15%, while diagnostics is expected to grow by 12%,” said Tausif Shaikh, analyst at BNP Paribas.
The report also predicted a 150 basis point improvement in earnings before interest, taxes, depreciation and amortization (EBITDA) margin, mainly due to hospitals.

APHS’ offline pharmacy business is forecast to grow 10% YoY, although its online businesses are expected to remain flat QoQ. Meanwhile, FORH is expected to improve its EBITDA margin by 280 basis points YoY to 19.2%. In the diagnostics sector, companies like Dr Lal PathLabs (DLPL) and Metropolis Healthcare (METROHL), Shaikh have predicted growth in patient volumes and better executions. However, FORH’s diagnostics arm, Agilus, may face challenges due to weaker brand recognition after the rebranding.

The report maintains a positive outlook for the sector, keeping earnings estimates, target prices and ratings unchanged. APHS and METROHL are identified as top picks, while strategic expansions and mergers promise growth opportunities.

Although Shaikh pointed to potential risks, including delays in occupancy improvements and increased competition, the overall mood remained upbeat.