As Coronavirus overloads hospitals with patients, should you buy hospital stocks or not?

By: |
March 24, 2020 2:12 PM

Private hospitals have been asked by the Health Ministry to make separate wards available for patients undergoing treatment for the deadly Coronavirus treatment. How should you look at hospital stocks?

At the moment only asymptomatic patients are being tested and even private labs have been given a nod to test patients for Coronavirus.

As India starts to test more and more patients, hospitals government and private are flooded with patients with confirmed or possible Coronavirus cases. Private hospitals have been asked by the Health Ministry to make separate wards available for patients undergoing treatment for the deadly Coronavirus treatment. At the moment only asymptomatic patients are being tested and even private labs have been given a nod to test patients for Coronavirus. The impact on hospitals stocks and company performance will be temporary, said ICICI Securities in a research report. Although the brokerage has revised target price for various hospital stocks, it continues to put a ‘buy’ call on shares like Apollo Hospitals, Fortis Healthcare and HCG.

“Our discussion with hospital companies indicates that the hospital business would be impacted on various counts in the near term but expect a meaningful part of the loss to be recovered post stabilisation of the situation,” the report said. Hospitals are set to witness a reduction in medical tourism, primarily foreign patients which contribute 10-15 per cent of the revenue, along with normal occupancy as things go back to normal in the coming quarters. “We expect the hospitals sector to witness a temporary impact in outpatient volumes with OPDs working at low capacity and patients avoiding movement out of their homes unless necessary, due to COVID-19,” ICICI Securities said in the report. However, no long-term impact is being envisioned on the sector as business see no structural impact.

More than 17,500 patients have been tested in India with the positive cases inching closer to 500 on Tuesday morning. ICICI Securities said that the lock-down in cities across India will hit business as well as only patients with serious illness will be admitted to hospitals under such circumstances. Deferment of treatments, unless necessary or time-sensitive will also weigh-in on hospitals. “We believe the hospitals and clinics business would see an impact on volumes until COVID-19 (Coronavirus) is contained. We rationalise our occupancy level estimates by ~10 per cent considering the disruption in H1FY21. However, we don’t see COVID-19 to structurally impact the hospital business in India from a long term perspective,” the brokerage said.

Apollo Hospitals has been upgraded to a ’buy’ rating by the brokerage with a revised target price of Rs 1,580 up from its current price of Rs 1,211 per share, an upside of 30 per cent. Aster DM has a revised target price of Rs 146 and upside of 75 per cent from its current price of Rs 83 apiece. Fortis Healthcare too has a ‘buy’ call with a revised target price of Rs 174, the scrip is currently trading at Rs 130 per share. HCG currently trading at Rs 70 has a target price of Rs 119 with an upside of 70 per cent.

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