Jefferies

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India Healthcare Services – Unmet Demand Conundrum: Initiating Coverage

— Piyush Nahar, Equity Research Analyst, India Healthcare

Indian hospitals need to alter their business model to focus on affordable healthcare and patients outside Tier-I cities to sustain their rich valuations. The premium segment is slowing on rising competition and narrowing supply demand gap with margins under pressure too. Growth in most existing hospitals has moderated over the past eight quarters, led by increased competition and a narrowed supply-demand gap in the premium segment. Hospital managements have also indicated that growth (single digit) will be largely led by pricing and mix. Jefferies expects margins to be under pressure due to competition (higher costs) and government policies (lower pricing). In this context, the firm initiates coverage of NARH and HCG with Buy, which appear best placed given their growing presence outside Tier-I cities. Additionally, Jefferies initiates on APHS with Hold as growth and margin challenges may endure. FULL REPORT