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Sunday, 10 October 2010

Fortis Healthcare Ltd-A Healthy Prescription

Indian Healhcare: Favourite pick- Fortis Healthcare Limited

People will always get ill- Hospitals will make money for time to come.
 
Health care is a classic defensive sector. No matter how bad the economy is, the argument goes, people still get sick. And they'll pay for medical care before they'll pay for almost anything else.
So far, health care stocks are holding up better than the rest of the market and are the best defensive stocks to hold, however bad the market, economy gets Hospital stocks will make superlative profits for their shareholders.
·         Hospital industry is an important component of the value chain in the Indian Healthcare industry rendering services and recognized as healthcare delivery segment of the healthcare industry.
·         India's rapid growth in the past three years has brought about a 'health transition' in terms of shifting demographics, socio-economic transformations and changes in disease patterns.
·         Healthcare, which is a US$35 billion industry in India, is expected to reach over US$75 billion by 2012 and US$150 billion by 2017.
·         The gap between the present and estimated infrastructure in the healthcare sector in India can be gauged through following indicators.
Particulars
FY2008-09
FY2018 (P)
FY2028 (P)
Additional Beds Required
1.1 million
3.1 million
6 million
Bed/1,000 Population Ratio
0.7 to 1.7
4
5

·         India requires an immediate investment of US$86 billion over the next 15 years to make up for the back-log. In addition to the infrastructure gap, India is also lacking in terms of medical manpower. Currently, India is known to have approximately 6 lakh doctors and 1.60 million nurses. As per the World Health Organization (WHO) guidelines, it translates into a gap of approximately 1.40 million doctors and 2.80 million nurses.
·         The major growth drivers for the sectors are as under:
o    Growing and aging population of India
o    Growing urbanization
o    Rising income levels
o    Increasing burden of chronic diseases
o    Healthcare financing transition
o    Medical value travel (medical tourism)
·         India's cost advantage and explosive growth of private hospitals, equipped with latest technology and skilled healthcare professionals have made it a preferred destination for medical tourism.


Healthcare is one of India’s largest sectors, in terms of revenue and employment, and the sector is expanding rapidly. During the 1990s, Indian healthcare grew at a compound annual rate of 16%. Today the total value of the sector is more than $34 billion. This translates to $34 per capita, or roughly 6% of GDP. By 2012, India’s healthcare sector is projected to grow to nearly $40 billion.

The private sector accounts for more than 80% of total healthcare spending in India. Unless there is a decline in the combined federal and state government deficit, which currently stands at roughly 9%, the opportunity for significantly higher public health spending will be limited.

Growing population and economy

One driver of growth in the healthcare sector is India’s booming population, currently 1.2 billion and increasing at a 2% annual rate. By 2030, India is expected to surpass China as the world’s most populous nation. By 2050, the population is projected to reach 1.6 billion.

This population increase is due in part to a decline in infant mortality, the result of better healthcare facilities and the government’s emphasis on eradicating diseases such as hepatitis and polio among infants. In addition, life expectancy is rapidly approaching the levels of the western world. By 2025, an estimated 189 million Indians will be at least 60 years of age—triple the number in 2004, thanks to greater affluence and better hygiene. The growing elderly population will place an enormous burden on India’s healthcare infrastructure.

The Indian economy, estimated at roughly $1 trillion, is growing in tandem with the population. Goldman Sachs predicts that the Indian economy will expand by at least 5% annually for the next 45 years  and that it will be the only emerging economy to maintain such a robust pace of growth.

Expanding middle class

India traditionally has been a rural, agrarian economy. Nearly three quarters of the population still lives in rural areas, and as of 2004, an estimated 27.5% of Indians were living below the national poverty line. Some 300 million people in India live on less than a dollar a day, and more than 50% of all children are malnourished.

However, India’s thriving economy is driving urbanization and creating an expanding middle class, with more disposable income to spend on healthcare. While per capita income was $620 in 2005, over 150 million Indians have annual incomes of more than $1,000, and many who work in the business services sector earn as much as $20,000 a year.

While this is a fraction of the income that their US peers earn, it is the equivalent of more than $100,000 per year when adjusted for purchasing power parity. More women are entering the workforce as well, further boosting the purchasing power of Indian households. Between 1991 and 2001, the percentage of women increased from 22% to 26% of the workforce, according to the latest Indian government census. Many of these women are highly educated: the ratio of women to men who have a college degree or higher level of education is 40:60.

Thanks to rising income, today at least 50 million Indians can afford to buy Western medicines—a market only 20% smaller than that of the UK. If the economy continues to grow faster than the economies of the developed world, and the literacy rate keeps rising, much of western and southern India will be middle class by 2020.

Rise of disease

Another factor driving the growth of India’s healthcare sector is a rise in both infectious and chronic degenerative diseases.

 While ailments such as poliomyelitis, leprosy, and neonatal tetanus will soon be eliminated, some communicable diseases once thought to be under control, such as dengue fever, viral hepatitis, tuberculosis, malaria, and pneumonia, have returned in force or have developed a stubborn resistance to drugs.

This troubling trend can be attributed in part to substandard housing, inadequate water, sewage and waste management systems, a crumbling public health infrastructure, and increased air travel.


FORTIS HEALTHCARE

Fortis Healthcare will definitely test your patience, but I believe subject to management acting diligently this should be a clear winner over a medium to long term period(12-36 months) and can easily ebe a 4-5bagger. The reason for my belief in FHL has been it has been hyperactive in acquiring stakes in Hospitals across India and the news just in is Fortis acquired QHA Holdings, Hongkong, it is evident from the its recent tussle to acquire Parkway Holdings with Kazanagh and now its announcement to acquire QHA Holdings that the Singh Brothers are trying to make FHL a Pan-Asia healthcare provider.

Since the dismissal of the law suit by Anil Nanda against Escorts Heart Institute and Research Centre has mitigitated the legal risk hanging over its head since its IPO. The company is now free to execute its plans for growing the Escorts network and brand. Fortis has the Largest Chain of NABH accredited hospitals in India. With the Promoters sitting on Huge Cash, the Rights Issue and the profits from the stake sale in Parkways giving some more cash, they can get a lot of Hospital Asset at distressed price and the Company is bound to be Multi Bagger in the years to come.

Background

Fortis Healthcare Limited(FHL) was incorporated in the year 1996. It was founded on the vision of creating an integrated healthcare delivery system. Based in Delhi, FHL, which acquired Escorts Heart Institute and Research Centre Limited in September 2005, has operations in Mauritius, Delhi, Jaipur, Noida, Mohali (Chandigarh), Amritsar, Faridabad, Chennai, Bangalore and Raipur. The company recently announced its first international venture in Mauritius. It currently has a network of 34 hospitals (including 11 satellite/heart command centres). These hospitals include multi specialty hospitals, as well as super-specialty centres providing tertiary and quaternary healthcare to patients in areas such as cardiac care, orthopedics, neurosciences, oncology, renal care, gastroenterology and mother and child care. The hospitals that FHL manages include Fortis La Femme, a “boutique” style hospital that focuses on women’s health and maternity care.

Future Plans

Fortis Healthcare intends to have 40 hospitals with 6000 beds by 2012. Two Green-field hospitals are under-construction, these are:
  • a super-speciality hospital in Shalimar Bagh, West Delhi, with specialization in cardiac care, orthopaedics, neuro-sciences, renal sciences, mother and child care and gastroenterology (first phase - 250 beds).
  • FIIMBS Medicity- a super-speciality hospital in Gurgaon, with a focus on trauma, oncology, mother and child care, cardiac care, orthopaedics, organ transplants and neuro-sciences (first phase -350 beds)
Further Fortis Healthcare is in negotiations to provide laboratory outsourcing services to UK-based private hospital groups, which would involve clinical samples being flown to India and the results sent back by e-mail.

Performance wise, Fortis has been moving from strength to strength. After the IPO and other fiascos, the company is back to what it does best - making people healthy and feel better.

They are also looking to expand with overseas acquisitions as they see tremendous potential so much so that they recently acquired a strategic investment into the best know Hospital chain group in Mauritius.

All in all, the future looks pretty bright. The way that i see it, the health care business will always remain in vogue more so when Indian lifestyle is becoming more sedentary, india will be the diabetics, heart issues capital of the world in the next two years, it might seem unfair in that I am looking for profits by expecting Indians to fall sick but I think life is never treats you fair!!!!!!!!!

The stock price has been rock solid between 160-175 levels and it looks like it’s forming a strong base at these levels.

Fortis acquires QHA Holdings

Fortis Global Healthcare Holdings has agreed to acquire the healthcare businesses of Hong Kong-listed QHA” for Rs.882 Crores. An agreement to this effect was reached between the two companies on October 8. The acquired businesses comprise a network of over 60 wholly-owned medical centres, over 500 affiliated clinics, over 40 dental and physiotherapy centres and a private nursing agency with a database of over 3,000 nurses

A must have stock that is at the cusp of strong growth..........

Happy Investing

Disclaimer

I am NOT an investing professional. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.

Thank you for reading Eazeetrade. Hopefully, we can all learn something together and become better investors! 

1 comment:

  1. Valuable information, may be it is best for long term investment. Thank you for providing the information, keep informing.

    ReplyDelete