The shares of hospitals were in focus on November 29 as brokerage firm HSBC has shared a note on four hospitals saying it expects 2025 to be a heavy year of expansion for the sector. While revenue growth is on the cards, earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin could be a drag, it said.

HSBC has a buy call on four hospital stocks on its list. It has set the target price for Apollo Hospitals at ₹8,220, which means it expects a potential upside of 20% in the stock from the closing price of November 28. The brokerage expects the shares of Krishna Institute of Medical Sciences (KIMS) to reach ₹670, which is 16% higher than the previous closing price.

It has also raised its target prices on Rainbow Childrens Medicare and Aster DM Healthcare to ₹1,800 and ₹550, implying that it expects the stocks to rise 18% and 12%, respectively, from their previous closes.

Brokerage	Rating	Target price
Apollo Hospitals	Buy	8220
KIMS	Buy	670
Rainbow Medicare	Buy	1800
Aster DM	Buy	550

“We prefer Buy-rated Apollo and KIMS: We maintain our positive view on the growth outlook for hospitals as structural drivers are intact: an ageing population, an increase in lifestyle-related disorders and rising health insurance coverage,” the brokerage said.

According to HSBC, despite significant bed additions, it does not see an excess supply issue, even in the micro markets within a city, as demand remains unmet.

It prefers hospitals that are expanding capacity without much drag on margins and that can improve occupancy, average revenue per occupied bed (ARPOB) and payor mix. It also does not assume any major risk for Apollo 24/7 (Apollo’s digital health platform) even if quick-commerce players enter the online pharmacy space.

The brokerage has placed big bets on hospitals expansion plans in the coming year. HSBC is of the view that a significant capex cycle is underway for hospitals in India to cater to strong demand for quality healthcare.

“Seven hospitals we cover plan to add 16,000 beds over 3-5 years, four times the 4,000 beds added in FY19-24 (we estimate 24,000 new beds including other private hospital chains),” the HSBC note reads.

It added that on the current visibility of capex projects, it estimates 40% of total planned beds being added in calendar year 2025. “Asset-light models (O&M, brownfield expansion) and M&A account for 60% of total planned additions. We see hospitals continuing to pursue M&A in 2025,” it further said.

On the back of capacity expansion, the brokerage said the market focus will likely be on the impact of costs related to new beds on EBITDA margins. “On our covered names, we expect revenue growth of 12-24% and a minor drag of 0-2% on EBITDA margins in FY25-27.”

It state three reasons for the likely drag in margin expansion

-Majority of bed additions are planned to capture strong demand in markets such as Delhi NCR, Bengaluru and Hyderabad,

-brownfield, and operations and management assets ensure faster scale-up of new beds

-growth in existing businesses could largely absorb the initial losses from new hospitals

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