Fortis Healthcare: Margin guidance intact despite ESOP; valuations comfortable

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

08 August 2026

Fortis Healthcare

Margin guidance intact despite ESOP; valuations

comfortable

Overweight

FOHE.NS, FORH IN

Price (07 Aug 26):Rs955.15

▲Price Target (Sep-27):Rs1,180.00

Prior (Mar-27):Rs1,120.00

We maintain OW: valuations are comfortable at ~24/21x FY28/29 EV/EBITDA,

hospital EBITDA growth is among the highest at ~22% CAGR over FY26–29, and

the largely brownfield-led bed addition pipeline lowers execution risk; the

Gleneagles margin improvement/strategic outcome remains an added catalyst.

Importantly, despite higher ESOP costs (guided at ~Rs400mn per quarter initially,

tapering over time), management reaffirmed the FY28 hospital EBITDA margin

target of 25%, which is constructive and underpinned by a path to offset ESOP

through operating improvements. 1Q was slightly ahead of JPMe with hospital

revenue/EBITDA up 19%/16% and Agilus margin at 23.8% (on gross revenues),

while hospital margins were marginally lower at 21.5% due to ESOP and newerunit drag. We cut FY27/28 EBITDA by 4% each to reflect ESOP costs, and revise

PT to Rs 1,180 (rolled forward to Sep-28E).

In-line revenues, margins tad higher: Revenues were Rs 25.5bn (+17% YoY,

+8% QoQ), in line with JPMe, driven by hospital growth (+19% YoY) on a 16%

increase in operational beds. Occupancy was flat YoY at 69%; ARPOB rose 2%

YoY (~100bps ahead of JPMe). Hospital EBITDA margin was at 21.5% (50bps YoY/QoQ), in line with JPMe; adjusted for Manesar/Yeshwanthpur

acquisitions and the leased Greater Noida facility, mgmt cited ~22%. Agilus’

gross revenues grew ~10% YoY on higher realizations, with EBITDA margin

at 23.8% (+80bps YoY, +190bps QoQ), 180bps higher than JPMe, aided by a

better mix (higher B2C, preventive and specialty).

Margin guidance intact despite ESOP cost: Management reiterated its FY28

hospital EBITDA margin guidance of 25% despite higher ESOP costs, and

sounded confident the incremental charge will be offset by operating

improvements, which is a constructive read-through. Key levers cited were

ramp-up of units currently dragging margins (about -40bps impact expected to

…