Healthcare sector poised to reach $638 billion by 2025? How analysts view Divi's, Apollo Hospitals, KIMS, other stocks now

Is it an opportune time to bank on the healthcare sector on Dalal Street? The healthcare sector has staged a stunning outperformance to the overall market, reflected in a 38.9 per cent rally in the Nifty Healthcare index during a 17.3 per cent upmove in the headline Nifty50 gauge in the past one year, as of December 4. This comes on the back of a strong earnings season for the entire healthcare sector, with robust operating numbers from drug makers. Many analysts are upbeat about the healthcare space post-COVID with growing demand across segments including pharmaceuticals and diagnostics. 

How did healthcare firms fare in Q2 FY25?

Most healthcare companies staged strong financial performances during the July-September period, with sectoral revenue growth recorded at 17.6 per cent.  

According to Axis Securities analysts, a 340-basis-point rise in hospital occupancy rates was a key growth driver in the sector. 

Meanwhile, overall revenue growth at major pharma companies stood at double-digit percentage levels. While revenue at Sun Pharma, the country's largest pharma firm, increased 9.0 per cent, Divi's Labs (22.5 per cent), Dr Reddy's (16.5 per cent) and Lupin (12.6 per cent) clocked strong growth. Cipla's revenue grew 5.6 per cent.

Bright prospects?

The domestic healthcare sector is poised to reach $638 billion by 2025 from $372 billion in 2023, having maintained a CAGR of 22.5 per cent over 10 years, a study by Bajaj Finserv AMC reveals. The growth prospects appear to be bright for the country's healthcare space, especially in the age-related healthcare segment, given an expected improvement in life expectancy from 67 years in 2021 to 84 years by 2045 and the median age seen growing by 1.3 times to 38.3 in 2050 from a projected 28.8 in 2025, according to the study.

"Private healthcare spending has surged with the hospital market size expanding from $62 billion in 2020 to $132 billion in 2023. India has emerged as a global vaccine hub, driven by companies like the Serum Institute and Bharat Biotech while diagnostics have shifted towards digital solutions, and the demand for home testing kits has soared," according to Sorbh Gupta, Senior Fund Manager at Bajaj Finserv AMC. 

Should you buy healthcare and related stocks now? 

Brokerages have handpicked several stocks from the healthcare space.

HSBC has maintained a 'buy' rating each on Aster DM Healthcare, Rainbow Children’s Medicare, Apollo Hospitals and KIMS, with targets of Rs 550, Rs 1,800, Rs 8,220 and Rs 670, respectively.

Meanwhile, Citi has a 'buy' rating assigned to Divi's Labs shares with a target of Rs 6,850.

What Axis Securities, Motilal Oswal, Geojit Financial and other domestic brokerages recommend

Healthcare stocks past performance

Here's how the healthcare sectors performed in the last one year: