Indian Hospital Stocks Eye Rebound in 2025 After 10-20% Dip: Expansion Boom Ahead

Mumbai | 22 December,2025

Why Hospital Stocks Are Back in Focus in 2025

India’s hospital sector has evolved from a cyclical healthcare play into a structurally compounding business. Large corporate hospital chains continue to gain share from standalone operators, driven by brand strength, clinical depth, stronger balance sheets, and operating efficiencies.

Despite this, hospital stocks have seen a meaningful correction recently, largely driven by near-term earnings moderation and start-up losses from new hospitals, creating what PL Capital views as a tactical entry point.

1. Recent 10–20% Stock Correction: Improving Risk-Reward

Hospital stocks have declined between 10% and 20% over the past two months, underperforming the broader BSE Healthcare Index. This correction has come despite strong long-term performance, over one to three years, a majority of hospital stocks under PL Capital’s coverage have comfortably outperformed the Nifty 50.

At current market prices, hospital stocks are trading at 20–25x FY28E EV/EBITDA, a level that appears reasonable in light of the sector’s expected 15–26% EBITDA CAGR over FY25–28E. Historically, similar corrections in hospital stocks have preceded periods of sustained recovery as demand and utilisation picked up.

2. Q2FY26 Earnings: Near-Term Noise, Strong Underlying Trends

The Q2FY26 earnings season was mixed for the hospital sector. Some companies reported flat or lower EBITDA on a year-on-year basis, largely due to:

• Start-up losses from newly commissioned hospitals
• A weaker-than-usual dengue season
• Initial operating costs linked to expansion

However, PL Capital notes that core hospital operations remained healthy, with base business growth staying in double digits once new-unit losses are adjusted. Key players such as Max Healthcare, Fortis Healthcare, and Healthcare Global (HCG) delivered relatively stronger performance, reinforcing confidence in the sector’s earnings trajectory.

3. 17,000-Bed Expansion Pipeline to Drive Growth

One of the most compelling structural drivers for hospital stocks is the upcoming capacity expansion cycle. Hospitals under PL Capital’s coverage currently operate around 49,000 beds, with plans to add nearly 17,000 beds by FY28, implying a 10%+ CAGR in bed capacity over the next three years.

Importantly, nearly 50% of this expansion is brownfield or inorganic, which typically offers faster ramp-up and better margin visibility compared to greenfield projects.

Aggressive capacity additions are planned by players such as Max Healthcare, KIMS, and Jupiter Lifeline, while others like Apollo Hospitals, Fortis, Medanta, and Aster DM are targeting steady expansion across key urban and semi-urban clusters.

4. CGHS (Central Government Health Scheme) Price Hike and Insurance Penetration to Lift Realisations

Another critical growth lever for hospital stocks is improving payor mix. Over the past few years, hospitals have benefited from:

• Rising insurance penetration
• Higher share of complex and elective procedures
• Better operational efficiency and lower average length of stay

PL Capital expects ARPOB (Average Revenue per Occupied Bed) to grow at 5–8% annually over FY26–28E, excluding the impact of new bed additions.

Additionally, the recent CGHS rate revision, expected to align government scheme pricing with other public healthcare programmes, should further support realisations from FY27 onwards. Hospitals with higher exposure to government schemes- such as HCG, Fortis, Max Healthcare, and KIMS, stand to benefit meaningfully.

5. Margins Likely to Rebound Over the Medium Term

While margins have come under pressure for some hospital chains over FY23–25 due to heavy capex and new unit commissioning, PL Capital expects a gradual recovery. As utilisation improves and operating leverage kicks in, margins across the sector are projected to expand by 100–350 basis points over FY26–28E.

Brownfield-heavy expansion strategies, cost optimisation initiatives, and better case mix are expected to drive margin improvement for most players, reinforcing earnings visibility despite near-term volatility.

PL Capital remains constructive on hospital stocks, supported by steady demand trends, planned capacity additions, and improving realisations. While near-term margins may stay muted due to expansion-related costs, PL Capital expects sector earnings to compound strongly over FY25–28.

PL Capital Top Picks: Max Healthcare, Aster DM Healthcare, Fortis Healthcare, and Healthcare Global.

Top 10 Hospital Stocks: PL Capital Coverage and Target Prices

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