Fortis Healthcare – Turning Around for Healthy Bottomline

Fortis Healthcare has been able to operationally turnaround its largest hospital – Escorts Heart Institute and Surgery Hospital. The management is now focused on steering other newer group hospitals to a steady state performance. Escorts acquisition also helped the management gain the required experience and they are now focused on smaller-scale acquisitions with a bed size of
around 100-150 beds, which in our view is a better strategy.

Two of the company’s projects at Shalimar Bagh and Gurgaon are on schedule and the company is not facing any liquidity or cash crunch. Management expects phase I to be commissioned on schedule in mid-2009 for Gurgaon (250 beds in phase I) and in 2010 for Shalimar Bagh (350 beds in phase II).

Expect Fortis to generate positive earnings for the first time ever in FY09E and improve further in the next two years. The company was loss-making till last year and we expect it to be profitable for the first time this year.

Fortis is expected to report an EPS of Rs 1.5 for FY09 and Rs 3.0 for FY10 according to Goldman Sachs report. Further, Goldman has upgraded the stock from neutral to BUY with a DCF based target of Rs 110.