The hospital sector has been in focus lately after the CGHS rate revision. Jefferies, in its latest report, analyses the sector dynamics in the backdrop of these changes in the rates and identifies top stocks to focus on.
According to their analysis, “India’s major hospital chains can add only about 32,000 new beds over the next five years, translating into a 7% compound annual growth rate (CAGR) for the large players and a mid–single-digit expansion for the overall sector. In other words, the numbers don’t justify the panic.”
Jefferies on Hospital sector: Bed gap is too wide to overfill
The report underlines the sheer scale of India’s healthcare shortfall. The country currently operates about 2.4–2.5 million beds, with roughly 38% in government hospitals and 62% in private facilities. To match the global average of 33 beds per 10,000 population, India needs an additional 2.4 million beds, nearly Rs 2.4 lakh crore in capital expenditure at the standard cost per bed.
Jefferies estimates that if the top 15 listed and major private hospital chains stretch their debt-to-EBITDA ratio to 3x, they could collectively fund 13,000–32,000 new beds. That’s it. Even this expansion, though numerically significant, would only dent the deficit, not close it.
The concern about overcapacity, the report says bluntly, “is more optical than real.” Hospitals simply do not turn all new beds operational on day one. According to them, “only about 25–35% of the new capacity is used initially, with gradual ramp-up over the next two to three years.”
Jefferies top picks in healthcare sector
Here are some of the key stocks on Jefferies’ radar
Jefferies on Max Healthcare: ‘Buy’
Jefferies names Max Healthcare as its top sector pick, calling it “at the next inflection point of accelerated growth.” Max plans to add 4,700 beds over its existing base of 5,360 beds at a striking 18–19% CAGR.
Jefferies expects EBITDA to grow at 20% CAGR between FY25–28, driven by brownfield expansion, improved utilisation, and recently acquired units scaling up faster than expected.
Revenue is projected to rise to Rs 1,38,000 crore by FY28, with margins holding above 25%. The brokerage reiterated a firm Buy stance, highlighting strong deal-making capabilities, improving average revenue per occupied bed (ARPOB), and expansion in both metro and Tier-II clusters.
Jefferies on Apollo Hospitals: ‘Buy’
Apollo, with its planned 4,372-bed addition over an existing base of 10,187 beds, is on track for 7.5% capacity CAGR. The report noted Apollo’s established footprint and strong brand recall but tempers expectations given slower near-term EBITDA growth versus peers.
Valuations remained on the higher side, trading near 31x FY27 EV/EBITDA, yet Jefferies remains positive on its long-term fundamentals, citing stable occupancy and improving insurance mix.
Jefferies on Fortis Healthcare: ‘Buy’
Fortis plans to expand capacity by 2,000 beds from a base of 4,175 beds, translating to a 10% CAGR. The brokerage sees operating leverage from newly expanded facilities and expects the CGHS rate revision to lift realisations further.
Jefferies flagged Fortis’s strong cash position and relatively lower leverage as positives, maintaining a Buy rating with expectations of double-digit EBITDA growth through FY28.
Jefferies on Medanta: ‘Buy’
With 3,000 beds to be added over a base of 3,062, Medanta’s planned 15% CAGR in capacity puts it among the most aggressive expanders. The brokerage notes stable occupancy levels in Gurugram and Lucknow despite high density, underscoring continued demand.
Jefferies expects steady ARPOB growth and consistent margins of 23–25%, retaining a Buy view.
Risks
Jefferies flagged two primary risks: slower ramp-up of new facilities, and potential delays in pricing adjustments from insurers. But these, it insists, are short-term frictions. “The long-term structural demand for quality healthcare in India remains vastly under-supplied,” the brokerage noted.