Macquarie Research: Fortis Healthcare (FORH IN, Rs162, Not rated)

Fortis Healthcare
(FORH IN, Rs162, Not rated)
Key takeaways
􀂃 Management expects the healthcare market to grow at a 15% CAGR for the next five years.
􀂃 Management believes the low healthcare penetration in India is a big opportunity for the organised
healthcare providers. Per capita healthcare spend in India is US$33 vs US$2548 in the US. Health
insurance is expected to grow at a 32% CAGR. With increasing awareness and companies
providing healthcare insurance, the penetration could potentially multiply in a few years. This
should be a significant driver as the health insurers have tie-ups with the healthcare providers.
􀂃 Also, fast growing medical tourism in India opens up great opportunity to be tapped by the quality
healthcare providers in India.
􀂃 Management believes Fortis is a great turnaround story. Overall, occupancy at Fortis has gone up
from 63% in FY08 to 74% in FY10. In FY10, the number of procedures went up significantly in key
segments (Cardiac up 35% YoY, Ortho up 41% YoY, Neuro up 125% YoY, Dialysis up 61% YoY).
As a result of which profitability has increased from 3.3% in FY09 to 7.4% in FY10.
􀂃 Management believes that currently the primary bottleneck is the scarcity of skilled doctors, but
going forward expects this to change with public-private partnership being initiated in medical
schooling. Fortis said it might enter into running medical colleges as a separate business.
Valuation
􀂃 Currently Fortis is trading at Bloomberg consensus PER of 29x FY12 earnings and ~32 x FY12
EV/EBITDTA.