Amnish Aggarwal sees boost for hospital margins in the midst of policy changes

The health care sector witnesses a new round of optimism after policy changes that can improve margins for hospital companies. According to Amnish Aggarwal of Prabhudas Lilladher, “the latest development actually gives more leeway to all hospital companies for the charging of more when the treatment is through government pensions or government arrangements. Now the margins will certainly improve. It is a large reset that will not only benefit from the consumer, but also the companies.”

Aggarwal pointed out that the sector has already seen a sharp rating in the last three years, with EV/EBITDA-VOLVOUDEN who moved from 15-18 times to more than 30 times. Although the ratings are no longer cheap, he expects steadily 15-17% CAGR return over the next two years. He emphasized Apollo hospitals and Fortis as attractive choices in the current scenario, especially with the continuous consolidation for IHH in Fortis.

On the FMCG side, Marico’s update of the second quarter reflected a steady performance. “Marico shows very steady trends whether it is parachute where they have done well or the new-age companies,” said Aggarwal. He noted that even the hair oil segment with added value, which was under pressure, shows signs of revival. However, he marked modest profitability growth as a result of rising Copra prices and GST-related inventory adjustments. Nevertheless, he believes that Marico remains a “very steady stock and has to do well in the medium term.”

The update of Avenue Supermarts, on the other hand, disappointed the street. Aggarwal admitted: “We actually expected a few percentage points more growth rate because we had an early festival season this year”, but added that floods, heavy rainfall and GST-related disruptions can have the sale. Yet he believes that the worst of margin correction is over and competition of rapid trade is on the rise as a key factor in top cities.

He also warned that the current wave of large primary issues – such as that of LG and Tata Capital – could temporarily sap the liquidity of the secondary market. “A lot of money actually goes in the new shares and that is where there has been a kind of problem in the general listed market,” he said, expected a strong subscription increase, especially for LG.

In general, AGARWAL sees the shares in health care permanent growth, FMCG delivers stable performance despite margin pressure, and retail confronted with short -term headwind of competition and liquidity shifts.