Max Healthcare, Apollo Hospitals fall up to 5 per cent; here’s why

Shares of hospital stocks, including Max Healthcare and Apollo Hospitals traded weak in Wednesday’s trade even as benchmark indices hit fresh record high for the second consecutive day today.

Max Healthcare shares traded in the red and fell nearly 5 per cent at day’s low to Rs 851.55, while Apollo Hospitals fell nearly 2 per cent to Rs 6173.30.

The crack in the hospital stocks largely comes as global brokerage Macquarie said that clinks in the armour are starting to show in the space. The brokerage mentioned that rate hikes primarily drive top line growth at Indian hospitals as volume growth continues to be moderate. Further it believes organic capacity addition over the next three years will be 4 times of the addition in the last five years. And amid this backdrop, it sees profitability to be under pressure for the healthcare space. Our earnings estimates are 9-22 per cent below consensus, it added.

Consequently, Macquarie has suggested an ‘underperform’ rating on both Max Healthcare and Apollo Hospitals, with a target of Rs 560 and Rs 5040 per share, respectively.

Earlier Aditya Khemka who is the fund manager – Healthcare at InCred Asset Management/PMS pointed out that currently hospital stocks are expensive, h,owever he sees potential in Healthcare Global and Aster DM Healthcare stocks as they are reasonably priced and their earnings are likely to grow, leading to higher stock prices. 

Shares of Apollo Hospitals and Max Healthcare over a one-year period have risen by 23 per cent and 51 per cent, respectively, Shares of Max Healthcare marked their fresh 52-week/ all-time high price last week of Rs 979.80.