Hospitals to lead healthcare sector growth in Q1FY27, profitability remains a concern: Report
New Delhi, July 13
The healthcare sector is likely to post healthy growth in Q1FY27 with aggregate revenue rising 13.2 per cent YoY led by hospitals; however, profitability is expected to remain under pressure, as per Motilal Oswal Financial Services.
The brokerage house noted that the sector has witnessed soft growth in FY26, with revenue rising 10.8 per cent YoY excluding hospitals.
As per MOFS, the sector is seeing robust operating momentum supported by healthy demand. It estimates aggregate revenue to grow to 13.2 per cent year-on-year, with hospitals expected to outperform the sector.
"After a subdued show in FY26 (revenue growth of 10.8% YoY excl. hospitals), we expect our Healthcare coverage universe, including Hospitals to deliver better growth in 1QFY27," it said.
The report noted that during the first two months of Q1FY27 (April-May 2026), chronic therapies maintained strong growth momentum, registering a year-on-year increase of around 15.5 per cent. Acute therapies also showed a notable recovery, with growth accelerating to 10 per cent year-on-year in April-May 2026, compared with 7.5 per cent in FY26 and 7 per cent in FY25.
On the other hand, the domestic formulations market continued to be led by robust demand in cardiac, anti-diabetic, and vitamins, minerals and nutrients (VMN) therapies, which outperformed the overall Indian Pharmaceutical Market (IPM).
Hospital companies are expected to post revenue growth of around 16.1 per cent year-on-year to Rs 133.4 billion in Q1FY27, driven by ongoing capacity additions, improved average revenue per occupied bed (ARPOB), strong operational execution, and the commissioning of new facilities.
Despite the expected improvement in revenues, earnings are likely to face pressure as per the brokerage house.
MOFS estimates earnings before interest, taxes, depreciation and amortisation (EBITDA) to grow by a modest 5 per cent year-on-year, while profit after tax (PAT) is projected to decline 3 per cent year-on-year.
The decline is mainly attributed to pricing pressure in select high-margin niche products in the US and an unfavorable geopolitical environment. It noted, "US revenue is expected to decline 5.4% YoY to USD2.3b in 1QFY27, primarily due to a steep 28%/30% YoY decline in US sales."
These headwinds, however, are expected to be partially offset by favourable currency movements and robust growth in the domestic formulations segment, the report said.
Overall, the brokerage house has maintained a neutral stance on the sector as per its report.
— ANI
Reader Comments
The growth in chronic therapies (15.5%) is promising – India's diabetes and heart disease burden is huge, so it's good to see domestic demand holding up. But I worry about the US export dependency mentioned. Pharma should focus more on R&D for new molecules instead of relying on generic margins.
Typical story – revenue up, profits down. The US pricing pressure and geopolitical issues are hitting hard. But for India, hospitals adding capacity and improving ARPOB is good news. Better infrastructure means better access. Let's hope the "robust operating momentum" translates to actual bed availability in smaller cities.
The 16.1% hospital revenue growth is impressive but the PAT decline is concerning. It shows hospitals are investing heavily (new facilities, capacity) which is good long-term but hurts short-term earnings. For investors, it's a hold. For patients, hopefully these expansions mean we don't have to wait weeks for a bed.
As someone who works in a hospital, I see the pressure firsthand. ARPOB improving is good for business but I hope it's not because they're charging patients more. The chronic therapy growth shows people are falling sick earlier – lifestyle diseases. Wish the report also mentioned preventive care investment.
MOTILAL OSWAL staying neutral is telling. Strong domestic demand vs weak US exports = mixed bag. The 5.4% US revenue decline is significant. But I'm optimistic about acute therapies recovering to 10% growth – suggests post-pandemic health spending is normalizing. Good for the sector long-term.
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