📌 At a Glance
Fortis Healthcare has gone from scandal-ridden survival mode to surgical-scale-up mode. Backed by Malaysia’s IHH and a diagnostics arm in SRL, Fortis now runs 4,000+ beds across 36 facilities. The stock has more than tripled in 5 years, but with P/E at 67 and ROE just 10%, are we paying Fortis prices for Apollo dreams?
🧠 1. How Fortis Got Back from the ICU
- 👀 Remember 2018? Fortis was fighting off the Singh brothers, Daiichi legal drama, and “cash vanish” allegations.
- 🧑⚕️ Enters IHH Healthcare (Malaysia), who now controls 31.17% stake.
- 🏥 Now operates across India, Nepal, Sri Lanka, and UAE.
- 🔬 Owns SRL Diagnostics (57% stake) — 415 labs, 8,200 direct clients, and 1,400 collection centers.
- 👨⚖️ Recently cleared legal hurdles to acquire Shrimann Hospital in Punjab — expansion mode on.
💉 2. Financials That Look… Stable. Not Stellar.
| Year | Revenue (₹ Cr) | Net Profit (₹ Cr) | OPM % | ROE % | EPS (₹) |
|---|---|---|---|---|---|
| FY21 | 4,030 | -56 | 10% | Neg | -1.45 |
| FY22 | 5,718 | 790 | 19% | 10% | 7.35 |
| FY23 | 6,298 | 633 | 17% | 10% | 7.80 |
| FY24 | 6,893 | 645 | 18% | 10% | 7.93 |
| FY25 | 7,783 | 809 | 20% | 10.2% | 10.26 |
🧪 5-Year PAT CAGR: 70.4%
💵 3-Year Cash from Ops CAGR: 28.6%
🏥 OPM improving steadily, now touching 20%
But…
- 📈 Revenue CAGR is just 11% over 5 years — low for a growth stock.
- ⚰️ P/E = 67. That’s Max Healthcare levels, not Fortis-level ROE.
- 🧾 Book Value = ₹118. CMP = ₹748 ⇒ P/B = 6.3x
🏁 3. Quarterly Check-Up: Healthy Signs
| Quarter | Sales (₹ Cr) | Net Profit (₹ Cr) | OPM % | EPS |
|---|---|---|---|---|
| Mar ’24 | 1,786 | 203 | 21% | 2.37 |
| Jun ’24 | 1,859 | 174 | 18% | 2.20 |
| Sep ’24 | 1,988 | 193 | 22% | 2.34 |
| Dec ’24 | 1,928 | 254 | 19% | 3.28 |
| Mar ’25 | 2,007 | 188 | 22% | 2.44 |
- 👩⚕️ Margins now in line with top-tier hospitals
- ⚖️ Volatility in net profit due to other income (watch that -₹29 Cr in Dec ’24)
⚔️ 4. Peer Pressure – Fortis vs the Big Hospital Boys
| Company | P/E | ROE (%) | Market Cap (₹ Cr) | OPM (%) |
|---|---|---|---|---|
| Max Healthcare | 100 | 14.9 | 1,13,000 | 20%+ |
| Apollo Hosp. | 70 | 17.1 | 1,00,874 | 16-18% |
| Fortis | 67 | 10.2 | 56,493 | 20% |
| Narayana Hrudayalaya | 48 | 20.6 | 38,286 | 20%+ |
| Global Health (Medanta) | 60 | 19.5 | 31,231 | 20%+ |
🔍 TLDR: Fortis has caught up on margins, but not yet on valuation quality (ROE still lags peers).
🔬 5. Fortis Diagnostics Arm = Hidden SRL Value?
SRL is one of India’s largest diagnostics chains — and it’s buried inside Fortis.
- 57% stake held in SRL
- Potential for demerger / IPO / unlock
- Dr. Lal Pathlabs (P/E 55) & Metropolis (P/E 70) trade at diagnostics premiums
- SRL IPO = Fortis rerating trigger?
🔮 6. Fair Value Range (FV)
Assumptions:
- FY26 EPS = ₹13.5 (assuming 20–25% PAT growth)
- Reasonable P/E for blended hospitals + diagnostics = 40–45x
📉 Fair Value Range = ₹540 to ₹610
😬 CMP = ₹748
🤕 That’s 25–30% above fair value zone.
Unless diagnostics is unlocked, it’s priced like an Apollo — but performs like a decent Fortis.
🚩 7. Red Flags and Syringe Stings
- 🩸 ROE of 10.2% = barely cost of capital
- 💳 P/E = 67? Even Maruti doesn’t dare.
- 🧱 ₹2,475 Cr borrowings in FY25 (up from ₹926 Cr in FY23)
- 💰 Other income volatile — sometimes negative
- 🤝 Still integrating hospitals — Shrimann may dilute short-term margins
🧠 TL;DR – Fortis is Back, But It’s Not Cheap
✅ Margins healthy
✅ Diagnostics arm (SRL) is a crown jewel
✅ Cash flow strong
❌ Valuation frothy
❌ ROE still underwhelming
If you missed the 2020 rally — don’t worry.
Fortis isn’t running away like a junior doctor at 3AM.
But unless SRL is spun off or profits jump 40% — this ₹748 stock feels more like ₹600 with a thermometer in its mouth.
✍️ Written by Prashant | 📅 19 June 2025
Tags: Fortis Healthcare, SRL Diagnostics, hospital stocks, healthcare sector India, Apollo Hospitals peer, Max Healthcare, IHH Malaysia, stock analysis, EduInvesting, fair value
