Hospital Sector Sees Strong Q4 Results with 18% YoY Revenue Growth

Despite a strong 18 per cent year-over-year (YoY) revenue growth trend, hospital expansion cycles are expected to keep margins rangebound, according to Kotak Securities. The brokerage firm’s analysis suggests that top-line momentum will continue, driven by strong Inpatient Department volumes and diagnostics business-to-consumer (B2C) traction.

Hospital Sector Delivers Strong Q4 Results

Kotak Securities reported that the March quarter was a “fine quarter” for hospitals, with 18 per cent YoY sales growth and 16 per cent YoY earnings before interest, taxes, depreciation, and amortization (EBITDA) growth. Average revenue per occupied bed (ARPOB) growth was healthy at 6-14 per cent YoY for most hospitals, led by a reduction in average length of stay (ALOS) and a better speciality mix.

KIMS posted 14 per cent YoY ARPOB growth, driven by contributions from high-ARPOB markets like Thane and Bengaluru. Medanta’s ARPOB rose 6 per cent YoY, despite the new Noida hospital, aided by lower ALOS and a higher complex case mix.

Key Drivers of Growth

Accoridng to Kotak Securities research report, Apollo Hospitals saw 9 per cent YoY average revenue per patient (ARPP) growth from better pricing/case mix, plus 7 per cent YoY inpatient (IP) volume growth. IPD footfalls grew 7-30 per cent YoY for most players, except Narayana Hrudayalaya and Max.

Market Impact and Details

• KIMS and Medanta margins were pressured by Thane/Bengaluru and Noida units, with KIMS facing delays in insurance empanelment.
• Max Healthcare was the outlier with just 1 per cent YoY ARPOB growth, hit by discontinuation of high-value chemo drugs for CGHS patients and GST rate cuts.
• Cumulative EBITDA for diagnostics grew 27 per cent YoY with 175 bps margin expansion.

Key Takeaways

• Top-line momentum is expected to continue, driven by strong Inpatient Department volumes and diagnostics B2C traction.
• Hospital expansion cycles are expected to keep margins rangebound.
• Diagnostics within coverage fared well, with 15-17 per cent YoY organic sales growth.

FAQs

What is the expected growth trend for the hospital sector?

The hospital sector is expected to continue its strong 18 per cent YoY revenue growth trend.

What are the key drivers of growth for hospitals?

The key drivers of growth for hospitals include strong Inpatient Department volumes, diagnostics B2C traction, and a reduction in ALOS and a better speciality mix.

How did diagnostics perform in the quarter?

Diagnostics within coverage fared well, with 15-17 per cent YoY organic sales growth on 9-13 per cent YoY sample volume growth and a higher wellness mix.

Conclusion

The hospital sector delivered strong Q4 results, with 18 per cent YoY sales growth and 16 per cent YoY EBITDA growth. Despite hospital expansion cycles keeping margins rangebound, the top-line momentum is expected to continue, driven by strong Inpatient Department volumes and diagnostics B2C traction. Investors are advised to keep a close eye on the sector’s performance and consider the key takeaways outlined above.