Hospitals: Expansion, medical tourism drive optimism
Joshi said he remains “extremely optimistic” on the organised hospital space, citing value-accretive expansion strategies and improving return metrics. “Most large hospital chains are expanding through a mix of brownfield and greenfield projects, with brownfield additions offering faster payback and superior return on capital employed,” he said.
He added that the asset-light expansion model being adopted by leading players has helped keep leverage under control, strengthening balance sheets across the sector. A key structural tailwind is the sharp rise expected in medical tourism over the coming years, alongside improving domestic healthcare demand.
“Organised players are gaining share as they offer advanced therapies across oncology and other critical care segments. This is expanding their footprint in both inpatient volumes and high-value procedures,” Joshi said.
Key operating metrics such as average revenue per operating bed (ARPOB), length of stay, and disciplined capital expenditure—typically ₹2.5–3 crore per bed—are expected to support sustained balance sheet growth and improving ROCEs, he noted. Marketsmith continues to hold names such as Fortis Healthcare and Max Healthcare in its model portfolios, while also tracking sector leaders like Apollo Hospitals.
Defence: Strong order books, budget visibility support outlook
On the defence sector, Joshi attributed the recent buzz to a combination of geopolitical developments and expectations of higher budgetary allocations. “With India deepening defence cooperation with countries like Japan and Australia, and potential new strategic exercises, the sector continues to see strong policy support,” he said.
He added that defence companies already have healthy order books, ensuring strong revenue visibility. Margins have remained resilient, and while quarterly execution may vary, the longer-term outlook remains robust.
“Defence is a structural growth story. Over the next five to seven years, balance sheets will look very different, with stronger cash flows, improving efficiencies and better return ratios,” Joshi said.
However, he cautioned investors to be selective, noting that while some defence stocks appear expensive, others are more reasonably valued based on FY28 earnings expectations.
Overall, Joshi said both hospitals and defence offer durable long-term opportunities, supported by strong fundamentals, policy tailwinds and improving financial metrics, even as near-term stock-specific valuations warrant careful selection.