The Covid 19 pandemic has made us realise the importance of good health. Timely and effective diagnostic tests have helped us beat Covid with limited damage. Healthcare sector becomes very important for any nation in this pandemic.
If we look at the performance of the overall healthcare industry in the past 5 years then, the S&P BSE Healthcare Index has offered decent returns of 65.63% as on 2nd May 2022. Moreover, during the Covid 19 pandemic, the healthcare index offered an absolute return of 90% from March 2020 to March 2022.
However, in the past year, the tables have turned. The S&P BSE Healthcare Index has offered only a mere return of 2.78% whereas Nifty has offered a return of 16.87% during the same time as on 2nd May 2022. Not just that, the stocks of the sector have also taken a hit. Dr Lal PathLabs Ltd is down by 27.58% in the past one year (as of 2nd May 2022). Another renowned healthcare stock, Metropolis Healthcare Ltd is down by 20.39% during the same duration. Not just that, there are many other healthcare stocks which are currently declining.
So, what might be the reason behind this? To understand it better, you need to first understand the healthcare industry better. So, let’s begin.
About the Healthcare Sector
The healthcare sector is vast. It includes:
- Diagnostic
The diagnostic sector is a major part of the healthcare industry. The diagnostic sector plays the role of an information intermediary. The role of the diagnostic company is to offer useful information for accurate diagnosis and treatment of diseases. So, whenever you visit a clinic for a blood test or magnetic resonance imaging (MRI) then that clinic is said to be a diagnostic center.
Now, the diagnostic industry is widely spread. There are unorganised players (47%), hospital-based labs (37%) and organized players (~16%).
As multiple players are offering the same test at different prices. In such a situation, patients often prefer to go to a clinic which gets the test done at a comparatively cheaper price. Hence, the challenge that the diagnostic players face is the pricing pressure. So, players often focus on acquiring more patients so that their profit margin increases contributing to the increase in total revenue.
- Medical devices, equipment, and hospital supplies manufacturers
These players focus on manufacturing products for the healthcare sector. They make surgical instruments, dental equipments, laser machine and a lot more. They also manufacture hospital beds and other equipment required in the hospital.
- Medical insurance players
Medical insurance players provide medical insurance or similar services to their patients. This sector includes players like health maintenance organizations (HMOs), companies which offer medicare services, healthcare consultants and healthcare staff recruitment agencies.
- Pharmaceutical segment
The pharmaceutical segment is an important part of the healthcare industry. This sector consists of players that produce over the counter (OTC) drugs, prescription drugs, biopharmaceutical drugs and generic drugs.
List of Healthcare Stocks Listed in India
| Name | Current Price | Market Capitalization |
| Sun Pharmaceutical Industries | 872 | 2,09,102 |
| Divi’s Laboratories | 4,270 | 1,13,347 |
| Cipla Limited | 924 | 74,546 |
| Dr. Reddy’s Laboratories | 3,919 | 65,222 |
| Apollo Hospitals | 3820 | 54940.36 |
| Torrent Pharma | 2,629 | 44,486 |
| Piramal Enterprises Limited | 1,833 | 43,747 |
| Biocon Limited | 331 | 39,740 |
| Alkem Laboratories | 3,014 | 36,037 |
| Abbott India Ltd. | 16,765 | 35,625 |
| Max Healthcare | 364.45 | 35338.33 |
| Aurobindo Pharma Limited | 566 | 33,167 |
| Lupin Limited | 699 | 31,779 |
| Laurus Labs Ltd. | 544 | 29,219 |
| Dr Lal Pathlabs | 2401.8 | 20017.82 |
| Fortis Healthcare | 243 | 18,345.48 |
| Alembic Pharmaceuticals | 739 | 14,532 |
| Narayana Hrudayalay | 667.6 | 13,643.13 |
| Glenmark Pharma Limited | 398 | 11,230 |
| Metropolis Health. | 2,113.00 | 10,813.22 |
| Krishna Institu. | 1272.2 | 10182.3 |
| Aster DM Health. | 184.4 | 9218.28 |
| Poly Medicure | 832.7 | 7987.49 |
| Vijaya Diagnost. | 410.95 | 4191.77 |
| Thyrocare Tech. | 746.85 | 3,951.09 |
| Health.Global | 274.75 | 3820.05 |
| Kovai Medical | 1561.95 | 1704.07 |
| Krsnaa Diagnostics | 532 | 1,670.35 |
| Kovai Medical Center | 1,455.95 | 1,593.14 |
| Shalby | 108.25 | 1,169.21 |
| KMC Speciality Hosp | 600 | 978.51 |
| Indrapr.Medical | 62 | 570.6 |
| Artemis Medicare | 40.1 | 531.43 |
| Innovexia Life Sciences Pvt. Ltd. | 435 | 446 |
| Prevest Denpro | 360 | 432.11 |
| Kaya | 321.8 | 420.4 |
| Dr Agarwals Eye Hsp | 779 | 366.13 |
| Tejnaksh Healthcare | 142.65 | 144.89 |
| Jeevan Scienti. | 92.65 | 141.78 |
| Global Longlife | 128.6 | 135.03 |
| Aashka Hospitals | 45.6 | 106.7 |
| Lotus Eye Hospital | 50.9 | 105.85 |
| Fortis MalarHospital | 52.5 | 98.39 |
| Scandent Imaging | 18.95 | 60.83 |
| Opto Circuits | 2 | 60.13 |
| Deccan Healthcar | 38.15 | 59.96 |
| Aspira Pathlab&Diagn | 54.05 | 55.63 |
| Nidan Laborator. | 38.3 | 53.24 |
| Adeshwar Meditex | 28.25 | 40.77 |
| Gian Lifecare | 29.95 | 30.97 |
| Medinova Diagnostic | 28.5 | 28.45 |
| Transgene Biotek | 3.74 | 28.34 |
| Centenial Surgic | 60.65 | 22.14 |
| NG Industries | 64.25 | 21.53 |
| Choksi Lab | 28.1 | 19.57 |
| Chennai Meena | 23 | 17.18 |
| Dr Lalchandani Labs | 34.4 | 14.91 |
| Soni Medicare | 26.3 | 11.22 |
| Looks Health Service | 10.35 | 10.87 |
| Shree Pacetronix | 21.3 | 7.67 |
| Indo-Global Enter. | 10.08 | 6.42 |
| DhanvantriJeevan Rek | 13.5 | 5.53 |
| Constronics Infra | 5.55 | 4 |
| Dolphin Medical Serv | 2.03 | 3.07 |
Let’s Take a Look at A Few Stocks from The Healthcare Sector
Apollo hospitals
Apollo Hospitals owns the largest pharmacy chain in India. Not just that the hospital has also emerged as Asia’s foremost integrated healthcare services provider as it has a solid presence in the healthcare sector. This includes hospitals, pharmacies, primary care & diagnostic clinics and several retail health models.
The company generates majority of its revenue from its healthcare business (53%). Its pharmacy business, Apollo pharmacy helps the company generate 41% revenues. Its health and lifestyle business generates 6% revenues. The hospital has 4,118 outlets across 20 states and 4 union territories.
The consolidated revenues of the company grew at a CAGR of 17% since 2013. The healthcare services revenue grew at a CAGR of 12%.
Source: Investor presentation of Apollo hospitals
Quick overview of Apollo Hospitals
| Market Cap (Cr): Rs. 55,178 Cr. | Face Value: Rs. 5 | EPS: Rs. 78.8 |
| Book Value: Rs. 369 | Roce (%): 8.44 | Debt to Equity: 0.80 |
| Stock PE: 63 | ROE (%): 3.79 | Dividend Yield (%): 0.08 |
| Promoter’s Holdings (%): 29.33 | Total Debt (Cr): Rs. 4,236 |
*Data as on 6th May 2022
Max healthcare
Max healthcare is the second largest hospital chain in the healthcare segment. It has excelled in offering services of oncology, neurosciences, cardiac sciences, orthopaedics, renal sciences and a lot more. Their chain of hospitals has a total bed capacity of more than 3,400 beds out of which 85% of beds are available in metro cities. The revenue of the company has also increased by 13% CAGR in the last three years (as on 24th February 2022). Recently the company has also acquired a 37% stake in Eqova healthcare which has a potential of adding 400+ beds in East Delhi.
Source: Investor presentation of Max healthcare
Quick overview of Max healthcare
| Market Cap (Cr): Rs. 35,110 | Face Value: Rs. 10 | EPS: Rs. 2.81 |
| Book Value: Rs. 63.2 | Roce (%): 3.55 | Debt to Equity: 0.07 |
| Stock PE: 129 | ROE (%): 1.45 | Dividend Yield (%): 0 |
| Promoter’s Holdings (%): 50.64 | Total Debt (Cr): Rs. 445 |
*Data as on 6th May 2022
Lal Path labs
Dr Lal Path labs is a renowned name and India’s leading consumer healthcare brand in the diagnostic sector. The company has an integrated nationwide network where they offer a broad range of diagnostic and healthcare-related tests and services.
The company has 216 laboratories, 3,095 patient service centres and around 7,000 pick-up units available across India. However, the company has dominated presence in the Northern parts of the country. If we look at the geographical breakup then, Delhi NCR is the dominant market for the company which has a market share of around 37%.
In the financial year 2021, the consolidated income of the company increased to Rs. 16,325.99 million compared to Rs. 13,854.02 million in the previous year.
The revenues of the company have increased at a CAGR of 15% since 2019. Also, the profit before tax has increased at a CAGR of 15%. Profit after tax has increased at a CAGR of 22%.
*Source: Annual report of 2021
Quick overview of Dr. Lal Pathlabs
| Market Cap (Cr): Rs. 19,801 | Face Value: Rs. 10 | EPS: Rs. 44 |
| Book Value: Rs. 165 | Roce (%): 35.4 | Debt to Equity: 0.03 |
| Stock PE: 53.9 | ROE (%): 25.1 | Dividend Yield (%):0.83 |
| Promoter’s Holdings (%): 55.2 | Total Debt (Cr): Rs. 41.4 |
*Data as on 6th May 2022
Fortis Healthcare
Fortis Healthcare is a leading integrated healthcare service provider across PAN India. The healthcare verticals of the company consist of hospitals, diagnostics and day care speciality facilities.
The company had recently acquired Super Religare Laboratories (SRL). It operates its diagnostics business through its 57% owned subsidiary in SRL Limited.
If we look at the financials of Fortis Healthcare then, the operating income in Q4FY2021 doubled as compared to the Q1FY2021. In Q1 the operating income was just Rs. 606 crores. Whereas, in Q4 the operating income is a whopping Rs. 1,252 cores.
The earnings before interest, taxes, depreciation, and amortization (EBITDA) and Profit after tax (PAT) margins have also improved.
*Source: Annual report 2021
Quick overview of Fortis Healthcare
| Market Cap (Cr): Rs. 19,112 | Face Value: Rs. 10 | EPS: Rs. 7.02 |
| Book Value: Rs. 81 | Roce (%): 2.59 | Debt to Equity: 0.25 |
| Stock PE: 53.3 | ROE (%): -1.72 | Dividend Yield (%):0 |
| Promoter’s Holdings (%): 31.2 | Total Debt (Cr): Rs. 1,522 |
*Data as on 6th May 2022
Metropolis Healthcare
Metropolis Healthcare Ltd. is another leading healthcare company dominating in the western parts of India. The revenue of the company grew by 17% in FY2021 as compared to FY2020. Profit after tax (PAT) grew by 44% in FY2021 as compared to FY2020. The average revenue per patient also increased to Rs. 1,015 which previously was Rs. 856.
*Source: Annual report 2021
Quick overview of Metropolis Healthcare
| Market Cap (Cr): Rs. 10,950 | Face Value: Rs. 2 | EPS: Rs. 46.1 |
| Book Value: Rs. 165 | Roce (%): 36.2 | Debt to Equity: 0.14 |
| Stock PE: 48.9 | ROE (%): 29.7 | Dividend Yield (%):0.37 |
| Promoter’s Holdings (%): 49.8 | Total Debt (Cr): Rs. 115 |
*Data as on 6th May 2022
Vijaya Diagnostic
Vijaya Diagnostics Centre is a leading and the largest diagnostic services provider in Southern parts of India. It offers services like nuclear medicine, radiology, laboratory, health check-ups and medical services. They have 81 diagnostic centers and 11 laboratories across 13 cities as of June 30, 2021. More than 92% of revenue is generated from its business to customer (B2C) segment.
The unique part of the company is that it follows a hub and spoke model. So, in a hub and spoke model the company will have test centers at multiple places but the laboratory will be at a different location. So, the test centers will collect the samples and send them to the laboratory at once. This will help the company increase its geographical presence while reducing its capital expenditure (Capex).
Quick overview of Vijaya Diagnostic
| Market Cap (Cr): Rs. 4,198 | Face Value: Rs. 1 | EPS: Rs. 18.6 |
| Book Value: Rs. 41.2 | Roce (%): 27.2 | Debt to Equity: 0.40 |
| Stock PE: 50 | ROE (%): 26.5 | Dividend Yield (%):0 |
| Promoter’s Holdings (%): 54.78 | Total Debt (Cr): Rs. 167 |
*Data as on 6th May 2022
Bottom line
The Covid-19 wave has been fading out and the omicron wave contribution has been significantly less. Moreover, unlock has been announced in major cities which will lead to lesser contribution towards Covid revenue. So, the companies will have to increase its non covid revenue to grow their business.
But, no matter what we are never going to compromise with our health and hence the healthcare industry is forever going to be in the spotlight.
To know which are the best healthcare stocks to buy, all you need to do is visit Samco’s star ratings page and check the ratings for healthcare stocks. The rating of a stock is revised daily and is calculated using more than twenty million data points. It also mentions the ratios and pros and cons of investing in the company. So, researching stocks just got easier.
To invest in any of the healthcare stock, open a Free Demat account with Samco.
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