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Hospitals Q1FY27: Capacity expansion sets the stage for next leg of growth over the next 5-6 years

ICICIdirect Research 28 Aug 2026 DISCLAIMER

Revenue growth for the top covered hospitals was ~25% YoY during the quarter, driven by growth in both in-patient volumes and Average Revenue Per Patient (ARPP). 
Hospitals have added ~15% bed capacity on an average over the past 3–4 quarters, with the incremental capacity now beginning to contribute meaningfully to growth. 
New-capacity overheads weighed on EBITDA during the quarter, resulting in EBITDA growth of ~22% and some margin pressure. We believe this drag is transient, with margins expected to recover as occupancy ramps up and the new capacities mature. 
In a key sector development, a parliamentary committee has proposed capping private hospital room rates at the average tariff charged by nearby three-star hotels, citing the rising burden of healthcare costs. 
However, our management interactions suggest that room rent accounts for only ~10% of ARPOB. We believe such a cap, if implemented, could dampen private-sector investments, particularly in underserved Tier-II and Tier-III cities, amid the risk of further government intervention across other adjacencies such as medical consumables, medicine costs, diagnostic test charges and doctor consultation fees. Hence, we believe less probability of such imposition of capping.  
Going forward, the top 12 listed hospitals plan to add ~25,600 beds (~37% increase in capacity) during FY26–30, providing a strong growth runway over the next 5–6 years. We remain positive on the hospital sector, with our top picks being Apollo Hospitals (TP: ₹10,170), Aster DM (TP: ₹895), Narayana Health (TP: ₹2,245) and Artemis (TP: ₹340).

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