Macquarie Downgrades Apollo, Max Hospitals; Warns of Earnings Drag

HEALTHCAREBIOTECH

Overview

Macquarie reiterated 'Underperform' ratings on Apollo Hospitals and Max Healthcare, citing aggressive sector capacity expansion. The brokerage forecasts ongoing earnings downgrades due to the EBITDA drag from new hospitals, which it believes is not fully priced into current estimates. Both stocks have significantly underperformed the Nifty 50 this year.

Macquarie Flags Downgrade Risk for Hospital Stocks

Shares of Apollo Hospitals Enterprise Ltd. and Max Healthcare Institute Ltd. faced pressure on Friday, January 9, as Macquarie Capital downgraded its outlook, warning of potential earnings downgrades. The brokerage maintained its 'Underperform' stance on both healthcare giants, signaling caution for investors.

Macquarie adjusted its price target for Apollo Hospitals to ₹6,230 from ₹5,700, while setting a ₹825 target for Max Healthcare. This valuation for Max Healthcare stands as the lowest among Street analysts, falling below the ₹1,000 mark.

Sector-Wide Expansion Concerns

The firm highlighted that both Apollo Hospitals and Max Healthcare have lagged the benchmark Nifty 50 index by 14% in 2025 year-to-date. Macquarie anticipates that consensus earnings estimates for these companies will likely face further reductions through 2026. This outlook stems from significant capacity expansion across the hospital sector.

Specifically, eight listed hospital chains have collectively guided plans to add over 6,000 beds by the end of fiscal year 2027. This represents the most substantial annual capacity increase observed in the past eight years. Macquarie's analysis suggests that the financial impact, particularly the earnings before interest, taxes, depreciation, and amortization (EBITDA) drag from these new facilities, is not adequately factored into current market expectations. Such underestimation poses a clear downside risk to projected earnings.

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