NewsStocksHospital Stocks Face Extended Pressure Through 2026 As Capacity Expansion Outpaces Market AbsorptionHospital Stocks Face Extended Pressure Through 2026 As Capacity Expansion Outpaces Market Absorption
Macquarie warns of continued challenges for hospital stocks through 2026, maintaining 'underperform' ratings on Apollo Hospitals and Max Healthcare despite raising target prices. The brokerage cites unprecedented capacity expansion of 6,000+ beds by FY27 across eight listed chains, representing 1.5 times past six years' additions, with gradual absorption expected to create EBITDA drag not fully reflected in current estimates.
*this image is generated using AI for illustrative purposes only.
Global brokerage Macquarie has delivered a sobering assessment of India's hospital sector, warning that listed hospital stocks face continued headwinds through 2026 as massive capacity expansion threatens to outpace market absorption. The firm expects another muted year ahead, with downside risks no longer remaining theoretical but becoming market reality.
Performance and Rating Updates
Macquarie has maintained its cautious stance on leading hospital operators, reiterating 'underperform' ratings while adjusting target prices based on evolving market dynamics.
| Company | Current Rating | Revised Target Price | Previous Target Price |
|---|---|---|---|
| Apollo Hospitals | Underperform | ₹6,230.00 | ₹5,700.00 |
| Max Healthcare | Underperform | ₹825.00 | ₹615.00 |
Both Apollo Hospitals and Max Healthcare have significantly underperformed the Nifty 50 by approximately 14% in 2025, reflecting investor concerns about the sector's growth trajectory. Macquarie anticipates further consensus earnings downgrades and valuation de-rating to continue weighing on these stocks throughout 2026.
Unprecedented Capacity Expansion Creates Concerns
The brokerage's primary concern centers on the scale of upcoming capacity additions across the hospital sector. Eight listed hospital chains have provided guidance to add more than 6,000 beds by the end of FY27, representing approximately 1.5 times the capacity added over the previous six years.
| Expansion Timeline | Bed Addition | Context |
|---|---|---|
| By FY27 | 6,000+ beds | 1.5x past six years' capacity |
| By FY30 | Additional 14,000 beds | Continued expansion beyond FY27 |
Macquarie believes the absorption of these new beds will be gradual, leading to initial EBITDA drag that current street estimates do not fully capture. The firm expects utilization ramp-up to be slow, keeping margins under pressure as new hospitals typically commence operations with lower occupancy rates and higher fixed costs.
Management Acknowledgment of Earnings Impact
Apollo Hospitals' management has acknowledged the financial risks associated with rapid expansion. During the most recent quarterly earnings call, Apollo indicated that new hospitals could create an EBITDA drag of approximately ₹150.00 crore. This represents a notable shift from earlier commentary in the fourth quarter of the previous fiscal year, when management suggested that profitability gains in existing hospitals would offset losses from new hospital operations.
At Max Healthcare, Macquarie notes that the profitability drag from new hospitals is already becoming visible in financial results. While consensus estimates for FY26 and FY27 EBITDA have already undergone trimming, the brokerage believes further downside risk remains, particularly for Max Healthcare's earnings trajectory.
Outlook and Market Implications
Given the scale of planned expansion across the sector, Macquarie expects continued risk of downward revisions to consensus earnings through 2026. The firm anticipates this could extend the relative underperformance of hospital stocks against the broader market, as investors grapple with the timing and pace of capacity absorption in India's healthcare sector.
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