Why brokerages expect up to 46% gains in hospital stocks after SC verdict

The immediate market response has been marked by volatility in hospital sector stocks amid fears of tighter price controls. However, leading global brokerage houses remain mostly optimistic about the sector’s medium-term earnings power, pointing to past precedents and hospital operators’ ability to adjust pricing models.

Goldman Sachs, for instance, has maintained ‘Buy’ ratings on major operators including Max Healthcare Institute, Krishna Institute of Medical Sciences (KIMS), Apollo Hospitals Enterprise, and Manipal Health Enterprises. The firm has run stress tests assuming a uniform 16% retail margin on all medicines, using current hospital mark-up assumptions between 20–30%. If hospitals did nothing to offset lost income, Goldman Sachs estimates an earnings before interest, tax, depreciation, and amortisation (EBITDA) impact ranging from 2% to 7%. However, the brokerage argues that incremental increases of 1–2% across other hospital revenue streams, as well as the growing use of package pricing, could compensate for pressure on medicine-linked margins. Package pricing accounted for 52% of private hospitalisation expenses in December 2025, up from 40% in June 2018, according to Goldman Sachs data, while medicine’s share of bills dropped to 14% from 19% in June 2014.

Jefferies takes a similarly constructive view, estimating a 2–5% possible EBITDA impact if strict caps are imposed. The brokerage notes that oncology drugs make up 4–6% of patient bills, non-oncology medicines account for 10–15%, and consumables for 12–15%. Jefferies cites previous regulatory moves, such as the 70–85% forced price cuts in cardiac stents and orthopaedic implants a decade ago, where hospitals largely recovered lost margins via higher procedure charges and cost rationalisation. The firm forecasts continued earnings growth, with projected EBITDA compound annual growth rates for top operators like Apollo, Fortis, Max, Manipal, Medanta, and Dr Agarwal’s Healthcare ranging from 17% to 23% between FY26 and FY29.

BofA Securities believes regulatory fears are likely to ease if ultimate government action is manageable. The brokerage reasons that only 15% of total pharmaceutical sales in India are likely exposed to institutional hospital sales, and that a significant share of in-hospital medicines is already covered by regulated margins. BofA Securities expects any correction in hospital stocks to be short-lived if the final regulatory move is less severe, as observed following earlier interventions in stents and implants.

Much of the current uncertainty surrounds non-scheduled medicines and whether a uniform 16% margin cap may be extended to all medicines, including patented products. Meanwhile, the sector’s earnings outlook appears resilient, with brokerages projecting robust compound annual EBITDA growth and implying significant upside for most hospital stocks. Analysts point to hospitals’ capacity to adapt through package pricing, greater insurance penetration, and agile pricing strategies in procedures and other services, positioning the industry to weather another round of price regulation.

While questions around hospital pharmacy mark-ups will now play out in the judicial and policy arena, private hospitals and investors are watching closely for clarity as the regulatory debate continues into late 2026.