Top Healthcare Sector Stocks in India

The Nifty Healthcare Index has significantly outperformed the Nifty50 benchmark, delivering 46% returns in the past year and 18% returns year-to-date, compared to Nifty50’s 28.8% returns over the past year and 10.8% returns year-to-date. Among the notable performers in the healthcare sector, five stocks have shown positive growth across various financial metrics.

These stocks are Indraprastha Medical Corporation, Dr Agarwal’s Eye Hospital, Kovai Medical Center and Hospital, Poly Medicure, and Fortis Healthcare. Here’s a comprehensive analysis of their performance.

Comparative Analysis

Indraprastha Medical Corporation stands out with a Price to Earnings (P/E) ratio of 17.53, which is above its historical P/E of 11.05. The stock has delivered an impressive 160.72% return over the past year. Dr Agarwal’s Eye Hospital also shows a P/E ratio of 32.38, significantly higher than its historical P/E of 18.33, reflecting strong investor optimism and a one-year return of 124.17%. Kovai Medical has a P/E ratio of 26.03, above its historical average of 16.64, with a return of 90.47% over the year. Poly Medicure’s P/E ratio is highest among the competitors, 73.08, above its historical P/E of 57.05, with a 69.43% return. Fortis Healthcare shows a P/E ratio of 61 against a historical P/E of 53.75, with a return of 56.79%.

A higher P/E ratio can sometimes indicate that the market expects a company’s earnings to grow at a faster rate than the average company. However, it’s important to note that, a potential for mean reversion to historical P/E ratios suggests room for adjustment in valuations.

Growth Metrics Analysis

Indraprastha Medical Corporation has demonstrated remarkable growth across multiple metrics. Over the past three years, it achieved a sales growth of 26.6%, profit growth of 257.19%, and an operating profit margin (OPM) growth of 12.5%. The company also posted a net profit margin (NPM) growth of 26.1%, cash flow growth of 38.5%, and a staggering debt increase of 1252.6%, coupled with a net block growth of 22.5%.

Dr Agarwal’s Eye Hospital shows strong sales growth of 31.69% and profit growth of 225.29% over the same period. Its OPM growth is relatively modest at 0.7%, with NPM growth of 5.4%, cash flow growth of 28.9%, and debt growth of 296.8%. The net block growth stands impressively at 229.7%.

Kovai Medical Center and Hospital posted a sales growth of 20.89%, profit growth of 32.33%, OPM growth of 4.4%, and NPM growth of 28.1%. The company’s cash flow growth is 30.9%, with a notable reduction in debt by 50.2% and a net block growth of 8.2%.

Poly Medicure reported sales growth of 20.55% and profit growth of 24.09%, with an OPM growth of 8.5% and NPM growth of 21.5%. Cash flow growth is robust at 39.4%, with debt growth at 26.7% and net block growth at 105.9%.

Fortis Healthcare has shown a sales growth of 19.59% and profit growth of 136.62%, with an OPM growth of 5.1% and NPM growth of 3.3%. The cash flow growth is 33.8%, with a debt reduction of 24.5% and a net block growth of 12.2%.

Return Ratios Analysis

• Dr Agarwal’s Eye Hospital leads with a remarkable Return on Equity (ROE) of 34.28%, indicating exceptional profitability and strong returns for equity investors. However, its Return on Assets (ROA) is 10.47%, lower than its peers, suggesting less efficient asset utilisation.
• Indraprastha Medical Corporation excels in ROA at 19.39%, also maintaining a high ROE of 28.92 and Poly Medicure with a respectable ROE of 19.05% and a strong ROA of 15.03%, indicating both companies effective use of both equity and assets to generate consistent profits.
• Kovai Medical Center and Hospital has a balanced approach with an ROE of 22.36% and an ROA of 12.48%, reflecting steady returns and efficient resource management.
• Fortis Healthcare trails with an ROE of 7.89% and an ROA of 4.99%, suggesting modest returns and less efficient asset utilisation.

Conclusion

Based on the comprehensive analysis of growth metrics and return ratios, Indraprastha Medical Corporation emerges as the top stock in the healthcare sector, demonstrating strong growth and efficient capital utilisation. Dr Agarwal’s Eye Hospital follows, driven by exceptional ROE and solid financial performance. Kovai Medical Center and Hospital ranks third with stable growth and returns. Poly Medicure, with balanced growth and return ratios, is placed fourth. Fortis Healthcare, despite lower returns, shows promising improvements and strategic growth, placing it last in the ranking.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.