HDFC Sec sees 10% upside potential in Rainbow Children's Medicare, here's why the optimism

Recently, leading life insurance firms also raked up their stakes in Rainbow Children's Medicare in May through investments of around Rs 161 crore.

Much like the entire hospital space, sentiment has been growing stronger by the day for Rainbow Children's Medicare. The recent addition to the list of brokerages that gave a bullish outlook for the children's hospital chain is HDFC Securities as it predicts a 10 percent upside potential for the stock.

The firm expects Rainbow Children's strong presence in southern India, aggressive expansion plans, higher occupancy and better operational performance to aid its performance in the near-future.

Baking that in, the firm believes investors can buy the stock in the range of Rs 935-955 and add more on dips to Rs 830-845, with a target price of Rs 1,042 over the next two-three quarter. The base case target price of Rs 1,042 reflects an upside potential of 10 percent while the bullish case target of Rs 1,118 shows potential for gains of over 18 percent.

"The hospital chain gradually evolved into a one-stop healthcare solution for child and mother care and is well placed in India’s pediatric and maternity healthcare market which is expected to grow at around 12-14 percent CAGR (Compounded Annual Growth Rate) over medium term," HDFC Securities highlighted in its report.

The company also follows a cost effective model and has a track record of healthy operational performance in terms of ARPOB (Average Revenue Per Occupied Bed), ALOS (Average Length of Stay) and occupancy.