Fortis Healthcare Q2FY27 growth strengthens capacity and margin outlook
Fortis Healthcare Ltd.
BUY (Maintain)
₹767
₹773
₹1,075
40.16%
Investment View and Recommendation
ICICI Securities, in its November 8, 2026 results update on Fortis Healthcare, maintained its BUY rating and Rs 1,075 target price after a stronger-than-expected Q2FY27. The broker believes weak investor sentiment is overshadowing solid operating execution. It remains constructive because Fortis has sufficient capacity additions, scope for occupancy and average revenue per patient (ARPP) improvement, and potential margin recovery despite ESOP costs and regulatory concerns around oncology drug trade margins.
Q2FY27 Financial Performance
Fortis Healthcare reported Q2FY27 revenue of Rs 2,734.8 crore, up 17.3 per cent YoY and 7.5 per cent QoQ, ahead of ICICI Securities' Rs 2,710 crore estimate. EBITDA rose 12.0 per cent YoY and 16.0 per cent QoQ to Rs 620 crore, compared with the broker's Rs 590 crore estimate.
| Metric | Q2FY27 | YoY change | QoQ change | ICICI Securities estimate |
|---|---|---|---|---|
| Revenue | Rs 2,734.8 crore | 17.3% | 7.5% | Rs 2,710 crore |
| EBITDA | Rs 620 crore | 12.0% | 16.0% | Rs 590 crore |
| Reported EBITDA margin | 22.8% | Down 110 bps | Up 170 bps | 21.8% |
| Adjusted PAT | Rs 310.2 crore | 2.1% | 19.7% | Rs 300 crore |
Reported EBITDA margin was 22.8 per cent, down 110 basis points YoY but up 170 basis points QoQ, and ahead of the 21.8 per cent estimate. Excluding the Rs 39.8 crore ESOP charge, EBITDA rose 19.2 per cent and margin was 24.2 per cent, up 30 basis points YoY. Adjusted PAT increased 2.1 per cent YoY and 19.7 per cent QoQ to Rs 310.2 crore, versus the broker's Rs 300 crore estimate.
Hospitals Business Drives Growth
The hospitals business was the principal growth driver. Hospital revenue rose 18.6 per cent YoY and 7.0 per cent QoQ to Rs 2,340.2 crore, supported by patient-volume growth and higher average revenue per patient. Occupancy reached 72 per cent in Q2FY27, against 69 per cent in Q1FY27 and 71 per cent in Q2FY26, while occupied beds increased 9 per cent YoY.
Fortis added 300 beds, around 6 per cent of capacity, in H1FY27 without compromising operating performance. Hospital EBITDA margin was 21.6 per cent, down 130 basis points YoY due to new-facility costs and ESOP charges. Fifteen hospitals, representing about 84 per cent of hospital revenue, delivered EBITDA margins above 20 per cent. Average length of stay was 4.2 days, while international-patient revenue increased 12.4 per cent YoY to Rs 190 crore.
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Capacity Expansion and Margin Outlook
Management has planned to add 1,000 to 1,100 beds during FY26 to FY29. ICICI Securities expects expanding capacity in Delhi NCR and Bengaluru, ramp-up at BG Road, Mulund, Manesar, Noida and Yeshwanthpur hospitals, and higher average revenue per occupied bed to support growth and absorb ESOP costs.
Management expects FY27 hospital EBITDA margin, including ESOP costs, to remain broadly flat YoY at about 22 per cent, or 23.5 per cent excluding ESOP, versus 21.6 per cent in H1FY27. The Rs 400 crore doctor and senior-employee ESOP plan announced in April 2026 is expected to cost about Rs 40 crore per quarter in FY27, declining to Rs 30 crore in year two and Rs 20 crore in year three. The broker considers concerns over this cost to be overdone.
Agilus Diagnostics Performance
Agilus diagnostics revenue increased 10.3 per cent YoY and 10.1 per cent QoQ to Rs 394.6 crore. Test volumes rose 7.3 per cent YoY to 1.14 crore and patient count rose 6.8 per cent to 47 lakh. Average revenue per test increased 4.8 per cent YoY to Rs 393. Better mix lifted Agilus EBITDA margin by 60 basis points YoY and 280 basis points QoQ to 29.7 per cent.
Estimates and Valuation
ICICI Securities reduced FY27E and FY28E EBITDA estimates by about 1 per cent to reflect the expected effect of curbs on oncology-drug trade margins. Its FY27E and FY28E EPS estimates were reduced by 2.3 per cent and 2.0 per cent, respectively.
| Metric | FY27E | FY28E |
|---|---|---|
| Revenue | Rs 10,940.1 crore | Rs 12,856.1 crore |
| EBITDA margin | 22.9% | 24.0% |
| Fortis EV/EBITDA | 24.1 times | 19.1 times |
The Rs 1,075 target price is unchanged and is based on FY28E sum-of-the-parts valuation. ICICI Securities values the hospitals business at 27 times FY28E EV/EBITDA and Agilus, in which Fortis holds an 89.2 per cent stake, at 24 times.
Potential IHH investment is an additional strategic consideration. IHH intends to raise its Fortis stake to 50 per cent from 31 per cent and may invest Rs 10,000 crore to reduce debt and fund expansion.
Key Risks and Overhangs
- Regulatory uncertainty and the expected effect of curbs on oncology-drug trade margins.
- An unfavourable litigation outcome.
- More intense competition that could weaken margins.
- The Delhi High Court-ordered forensic audit into a historical promoter stake-sale transaction, which remains in progress.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
