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Buy Fortis Healthcare – Citigroup

July 11, 2007

Citigroup Research in a report released just a while ago has put a BUY recommendation on Fortis Healthcare with a price target of Rs 100.

Fortis Healthcare is a Ranbaxy group company. Fortis has fallen 24% since its listing in May-07. We at Dalal Street Business had an Avoid recommendation on the IPO. However, we believe that the company is in a sunrise business and one may start accumulating the stock in small lots.

Citi believes inadequate health care infrastructure and limited government investment provide significant opportunities for the private sector. Fortis has scaled up through organic and inorganic measures, and has built a strong brand equity in North India. Fortis’ focus on super-specialty care bodes well for the company. Fortis will enter a high-growth phase over the next few years (a 53% EBIDTA CAGR over FY07-10E), led by improving efficiencies in existing hospitals and rapid expansion. It also has an aggressive acquisition track record.

Fortis is expected to report a fully diluted EPS of Rs -2.18 for FY08 and Rs 0.60 for FY09.

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