Artemis Medicare shares gain 26% in 3 months; analysts see 30% upside

ET Intelligence Group: Shares of Artemis Medicare Services have gained 26% over the past three months compared with 8.6% increase in the BSE Healthcare index and 3.7% fall in the BSE Sensex. The company, which operates multi-specialty hospitals, is in the process of expanding capacity across Gurugram, Raipur and South Delhi over the next few years. It targets around 2,000 operational beds by FY30 from 1,100 beds at present. Analysts have retained a ‘buy’ rating on the stock with over 30% higher target prices from Thursday’s closing price of ₹331 on the BSE.

The newly operational Artemis Shanti Hospital in Raipur is expected to be a key growth driver for the company, though its earnings contribution is likely to be gradual. The 300-bed facility commenced operations in July. The company expects the hospital to incur an operating loss of around ₹20 crore during the ramp-up phase, with operating break-even likely in 15-18 months as utilisation levels improve.

International patient mix will be another growth driver for the company’s average revenue per operating bed (ARPOB). International patients, who generate higher ARPOB than their domestic counterparts, accounted for 27% of revenue in the June quarter despite disruptions caused due to the West Asian conflict. The company expects the mix to either approach or exceed 30% in the September quarter.

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Improving utilisation at the Gurugram facility also augurs well since it contributes over 95% to revenue at present. The facility’s occupancy rate is expected to rise to 70-75% from 65.7% in the June quarter. The company expects this to result in the expansion of operating margin before depreciation and amortisation (Ebitda margin) to 20-21% in FY27 and 23-24% over the next few years from 20.2% in FY26. To accommodate growing demand, the company plans to add over 200 beds through Tower IV at an estimated capital expenditure (capex) of ₹120 crore.

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The VIMHANS project in South Delhi is expected to provide another significant growth leg beyond FY28. The proposed facility will initially have 450 beds, with a further 200 beds planned subsequently. Artemis expects the hospital to become operational in FY29. Given the premium nature of the market, the project is expected to support ARPOB.

InCred Equities expects revenue and EBITDA to grow annually at 23% and 28% respectively between FY26 and FY28, supported by higher bed utilisation, a premium case mix and efficiencies at its existing operations. The pace of occupancy ramp-up at Raipur, timely execution of Tower IV and continued improvement in occupancy and margins at the Gurugram facility will be key monitorables. The brokerage expects debt to peak at ₹300-350 crore in FY28 from ₹226 crore in FY26 while annual cash generation is estimated at ₹200-250 crore as against cash and cash equivalents of ₹33 crore in FY26.