With a market capitalisation of ₹3,821 crores, Artemis Medicare has demonstrated strong operational momentum in the recent quarter, driven by improved margins and revenue growth. Yet the company's shares have struggled over the past year, declining 23.52% and significantly underperforming both the Sensex (up 5.37%) and the broader hospital sector (up 12.12%). The divergence between strong quarterly results and weak stock performance highlights investor scepticism about the sustainability of recent gains and concerns over the company's modest return ratios.
| Quarter | Revenue (₹ Cr) | Net Profit (₹ Cr) | Operating Margin | PAT Margin |
|---|---|---|---|---|
| Sep'25 | 274.70 | 29.97 | 18.42% | 10.92% |
| Jun'25 | 254.96 | 21.28 | 16.24% | 8.32% |
| Mar'25 | 239.90 | 23.03 | 14.96% | 9.55% |
| Dec'24 | 232.39 | 20.67 | 16.12% | 8.86% |
| Sep'24 | 241.42 | 22.26 | 17.50% | 9.17% |
| Jun'24 | 223.20 | 16.67 | 16.21% | 7.40% |
| Mar'24 | 225.24 | 14.18 | 16.85% | 6.35% |
Financial Performance: Margin Expansion Drives Profitability Surge
Artemis Medicare's Q3 FY26 results showcased impressive margin expansion across all profitability metrics. Net sales climbed 7.74% quarter-on-quarter to ₹274.70 crores from ₹254.96 crores in Q2 FY26, whilst registering a healthy 13.79% year-on-year growth. The company's operating margin (excluding other income) expanded significantly to 18.42% from 16.24% in the previous quarter, representing a 218 basis point improvement. This margin expansion was particularly noteworthy given the challenging operating environment in the healthcare sector.
The profit after tax margin witnessed an even more dramatic improvement, surging 260 basis points quarter-on-quarter to 10.92% from 8.32%. This profitability enhancement was driven by a combination of improved operating leverage, better cost management, and a favourable tax rate of 23.79% compared to 28.84% in Q2 FY26. On a nine-month basis for FY26 (April-December 2025), the company reported consolidated net profit of ₹73.92 crores on revenues of ₹762.05 crores, demonstrating sustained momentum throughout the fiscal year.
Employee costs remained relatively stable at ₹39.27 crores, representing 14.30% of revenues compared to 15.06% in Q2 FY26, indicating improved productivity. Interest costs declined marginally to ₹7.19 crores from ₹7.38 crores, whilst depreciation increased slightly to ₹11.71 crores from ₹11.16 crores. Other income contributed ₹7.65 crores during the quarter, up from ₹6.93 crores in Q2 FY26, providing additional support to bottom-line performance.
Operational Challenges: Weak Return Ratios Persist Despite Strong Growth
Despite the impressive quarterly performance, Artemis Medicare continues to grapple with suboptimal capital efficiency metrics that raise concerns about long-term value creation. The company's return on equity (ROE) stands at a modest 9.51% on an average basis, significantly below the 15% threshold typically expected from quality healthcare operators. The latest half-yearly ROE of 10.76%, whilst showing improvement, remains inadequate for a company trading at elevated valuation multiples.
Return on capital employed (ROCE) presents a similar picture, averaging 10.87% over the assessment period. Whilst the half-yearly ROCE improved to 13.34%—the highest recorded level—this metric still falls short of demonstrating strong capital productivity. For a capital-intensive hospital business that requires continuous investment in medical equipment, infrastructure, and technology, these return ratios suggest the company is not generating adequate returns on the capital deployed.
Capital Efficiency Concern
Key Issue: Artemis Medicare's average ROE of 9.51% and ROCE of 10.87% indicate weak management efficiency in generating returns from shareholder capital and invested capital. Whilst recent quarters show improvement, the company needs to demonstrate sustained enhancement in these metrics to justify its current valuation premium. The modest return ratios are particularly concerning given the company's significant capital requirements for expansion and equipment upgrades.
On a more positive note, the company's balance sheet quality has improved considerably. Artemis Medicare operates with minimal leverage, maintaining a debt-to-equity ratio of just 0.32 times as of H1 FY26—the lowest level recorded. With total long-term debt of ₹209.48 crores against shareholder funds of ₹837.68 crores as of March 2025, the company enjoys a comfortable financial position. The debt-to-EBITDA ratio stands at a manageable 1.34 times, indicating strong ability to service debt obligations. Notably, the company is effectively a net cash entity with an average net debt-to-equity ratio of -0.08, providing financial flexibility for growth initiatives.
Growth Trajectory: Impressive Long-Term CAGR Faces Sustainability Questions
Artemis Medicare has delivered commendable growth over the past five years, with sales expanding at a compound annual growth rate of 18.05% and EBIT growing at an exceptional 82.15% CAGR. This growth trajectory reflects the company's success in scaling operations, improving utilisation rates at its Gurugram facility, and enhancing operational efficiency. The company's revenue increased from ₹408 crores in FY21 to ₹936 crores in FY25, demonstrating resilience even through the pandemic-affected years.
However, the sustainability of this growth rate remains a critical question for investors. The hospital sector in India is becoming increasingly competitive, with established players expanding capacity and new entrants targeting premium segments. Artemis Medicare's single-hospital model in Gurugram, whilst well-positioned in the National Capital Region, lacks the geographic diversification of larger peers. The company's ability to maintain double-digit growth will depend on its success in expanding bed capacity, improving occupancy rates, and potentially establishing new facilities.
Growth Sustainability Assessment
Whilst Artemis Medicare's five-year EBIT CAGR of 82.15% is impressive, investors should note that this growth was from a low base and benefited from post-pandemic recovery in elective procedures. The company's operating profit margin (excluding other income) has expanded from 8.60% in FY21 to 16.10% in FY25, suggesting much of the margin expansion opportunity may already be captured. Future growth will likely be more moderate and dependent on volume expansion rather than margin improvement.
Industry Context: Hospital Sector Dynamics and Competitive Positioning
The Indian hospital sector has witnessed robust growth driven by rising healthcare expenditure, increasing insurance penetration, and growing demand for quality tertiary care services. However, the sector remains highly fragmented with intense competition in major metropolitan markets. Artemis Medicare operates in the premium segment of the Delhi-NCR market, competing with established brands such as Max Healthcare, Fortis Healthcare, and Medanta.
The company's positioning in Gurugram provides both advantages and constraints. The location serves affluent catchment areas and benefits from medical tourism, particularly from neighbouring states and international patients. However, the single-hospital model limits growth potential compared to multi-facility chains that can leverage brand recognition and operational synergies across locations. The company's market capitalisation of ₹3,821 crores places it firmly in the small-cap category, significantly smaller than industry leaders.
| Company | P/E Ratio (TTM) | P/BV Ratio | ROE % | Debt to Equity | Dividend Yield |
|---|---|---|---|---|---|
| Artemis Medicare | 39.95x | 4.30x | 9.51% | -0.08x | 0.16% |
| Healthcare Global | 236.14x | 9.07x | 3.32% | 1.70x | NA |
| Jeena Sikho | 101.01x | 29.62x | 33.19% | -0.07x | 0.17% |
| Park Medi World | 32.77x | 6.18x | 0.00% | 0.00x | NA |
| Kovai Medical | 25.39x | 4.88x | 19.55% | 0.08x | 0.19% |
| Yatharth Hospital | 38.08x | 3.44x | 11.44% | -0.15x | NA |
The peer comparison reveals Artemis Medicare's relative positioning within the hospital sector. The company trades at a P/E ratio of 39.95x, which is moderate compared to peers like Healthcare Global (236.14x) and Jeena Sikho (101.01x), but higher than Kovai Medical (25.39x). However, the company's ROE of 9.51% is significantly lower than the sector standout Jeena Sikho (33.19%) and Kovai Medical (19.55%), though better than Healthcare Global's 3.32%. The price-to-book ratio of 4.30x appears reasonable compared to peers, particularly given the company's net cash position.
Valuation Analysis: Attractive Entry Point or Value Trap?
Artemis Medicare's current valuation presents a nuanced picture that requires careful consideration. Trading at a P/E ratio of 39.95x based on trailing twelve-month earnings, the stock commands a premium to some hospital sector peers but appears reasonable relative to the broader small-cap hospital universe. The company's EV/EBITDA multiple of 22.52x and EV/Sales ratio of 3.72x suggest investors are pricing in expectations of continued growth and margin improvement.
The stock's price-to-book ratio of 4.30x appears elevated given the company's modest ROE of 9.51%. Typically, a P/BV ratio above 4x would be justified by ROE levels exceeding 20%, creating a significant gap between valuation and fundamental returns. This disconnect suggests the market is either anticipating substantial improvement in return ratios or the stock may be overvalued at current levels. The PEG ratio of 1.45x indicates the valuation is not excessive relative to growth, though this metric assumes the continuation of historical growth rates.
The stock has declined 28.67% from its 52-week high of ₹335.90, currently trading at ₹239.60. This correction has improved the valuation somewhat, with the company's proprietary assessment indicating an "Attractive" valuation grade. However, investors should note that the valuation grade has fluctuated between "Attractive" and "Very Attractive" in recent months, suggesting the stock is trading near fair value rather than at a significant discount. The minimal dividend yield of 0.16% provides little income support for investors.
Shareholding Pattern: Promoter Stake Reduction Raises Questions
The shareholding pattern of Artemis Medicare has witnessed notable changes in recent quarters that warrant careful attention. Promoter holding declined significantly from 66.53% in September 2025 to 58.43% in November 2025, representing an 8.10 percentage point reduction. The promoter stake further decreased marginally to 58.39% in December 2025. This substantial reduction in promoter holding over a short period typically raises concerns about promoter confidence in the company's near-term prospects or potential liquidity requirements.
| Quarter | Promoter % | FII % | Mutual Fund % | Insurance % | Other DII % |
|---|---|---|---|---|---|
| Dec'25 | 58.39% | 12.47% | 1.69% | 0.00% | 7.37% |
| Nov'25 | 58.43% | 12.48% | 1.79% | 0.00% | 7.72% |
| Sep'25 | 66.53% | 0.37% | 2.01% | 0.46% | 8.82% |
| Jun'25 | 66.53% | 0.24% | 1.96% | 0.69% | 9.13% |
| Mar'25 | 67.17% | 0.31% | 1.96% | 0.71% | 9.46% |
Interestingly, the reduction in promoter stake coincided with a dramatic increase in foreign institutional investor (FII) holding, which surged from 0.37% in September 2025 to 12.48% in November 2025, before settling at 12.47% in December 2025. This 12.11 percentage point increase suggests that FIIs acquired a significant portion of the shares sold by promoters, indicating institutional confidence in the company's prospects. The presence of 23 FII investors provides some comfort regarding the quality of the institutional base.
Mutual fund and insurance company holdings have declined modestly over recent quarters. Mutual fund holding decreased from 2.01% in September 2025 to 1.69% in December 2025, whilst insurance holdings dropped from 0.46% to zero during the same period. Other domestic institutional investor (DII) holdings also declined from 8.82% to 7.37%. The reduction in domestic institutional participation, combined with promoter stake dilution, creates a mixed picture for governance and long-term stability. A concerning aspect is the high promoter pledging at 44.53%, which indicates that a substantial portion of promoter shares are encumbered.
Stock Performance: Significant Underperformance Despite Long-Term Gains
Artemis Medicare's stock performance presents a tale of two timelines—exceptional long-term returns contrasted with significant recent underperformance. Over the past year, the stock has declined 23.52%, dramatically underperforming the Sensex which gained 5.37% during the same period. This represents a negative alpha of 28.89 percentage points, indicating substantial value destruction for recent investors. The stock has also underperformed the hospital sector, which delivered 12.12% returns over the past year, resulting in a sector underperformance of 35.64 percentage points.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +6.30% | +0.16% | +6.14% |
| 1 Month | -14.09% | -4.78% | -9.31% |
| 3 Months | -3.29% | -2.71% | -0.58% |
| 6 Months | -2.08% | +1.32% | -3.40% |
| YTD | -11.59% | -4.17% | -7.42% |
| 1 Year | -23.52% | +5.37% | -28.89% |
| 2 Years | +28.03% | +13.29% | +14.74% |
| 3 Years | +268.90% | +36.26% | +232.64% |
| 5 Years | +1,040.95% | +64.00% | +976.95% |
The medium-term picture is equally challenging, with the stock down 14.09% over the past month and 11.59% year-to-date. Short-term volatility remains elevated, with the stock showing a one-week gain of 6.30% but three-month decline of 3.29%. The stock's beta of 1.35 indicates it is significantly more volatile than the broader market, amplifying both gains and losses. With a volatility of 36.86% over the past year, the stock falls into the "high risk, low return" category—an unfavourable combination for risk-adjusted performance.
However, the long-term performance tells a dramatically different story. Over three years, the stock has delivered exceptional returns of 268.90% compared to the Sensex's 36.26%, generating alpha of 232.64 percentage points. The five-year performance is even more impressive, with returns of 1,040.95% compared to the Sensex's 64.00%, representing alpha of 976.95 percentage points. These stellar long-term returns reflect the company's transformation from a struggling hospital operator to a profitable, growing enterprise. Early investors have been handsomely rewarded, though recent entrants have faced significant challenges.
Technical Analysis: Sideways Trend with Multiple Resistance Levels
From a technical perspective, Artemis Medicare's stock is currently in a sideways trend, having shifted from mildly bullish on February 1, 2026. The stock is trading below all key moving averages, including the 5-day (₹239.78), 20-day (₹251.76), 50-day (₹266.76), 100-day (₹255.98), and 200-day (₹253.89) moving averages. This broad-based weakness across multiple timeframes suggests sustained selling pressure and lack of buying interest at current levels.
Technical indicators present a mixed picture. The MACD shows bearish signals on both weekly and monthly timeframes, indicating downward momentum. The RSI shows no signal on weekly charts but displays bullish readings on monthly timeframes, suggesting potential oversold conditions on longer timeframes. Bollinger Bands indicate bearish positioning on weekly charts but sideways movement on monthly charts. The stock faces immediate resistance at the 20-day moving average of ₹251.76, with major resistance at the 100-day moving average of ₹255.98. Support is visible at the 52-week low of ₹208.75.
Investment Thesis: Quality Concerns Overshadow Strong Quarterly Performance
Artemis Medicare's investment case presents a complex picture that requires balancing strong recent operational performance against structural concerns about capital efficiency and growth sustainability. The company's proprietary Mojo Score of 54/100 places it firmly in "HOLD" territory, reflecting this mixed assessment. The score incorporates four key parameters: valuation (attractive), quality (average), financial trend (positive), and technical trend (sideways).
The quality assessment reveals the company's fundamental challenges. With an average quality grade, Artemis Medicare demonstrates healthy long-term growth (18.05% sales CAGR) and operates with minimal debt (net cash company). However, the company's weak return ratios—average ROCE of 10.87% and average ROE of 9.51%—indicate poor capital efficiency. The high promoter pledging of 44.53% adds another layer of concern, suggesting potential financial stress or liquidity constraints at the promoter level.
Key Strengths and Risk Factors
Key Strengths
- Strong Debt Management: Low debt-to-EBITDA ratio of 1.34x demonstrates excellent ability to service obligations; net cash company with negative net debt-to-equity of -0.08x
- Impressive Long-Term Growth: Operating profit CAGR of 82.15% over five years reflects successful business transformation and operational improvements
- Margin Expansion: H1 FY26 ROCE at 13.34% represents highest level achieved, indicating improving capital productivity
- Reasonable Valuation: P/BV of 4.30x appears attractive compared to quality metrics, offering potential upside if ROE improves
- Attractive Absolute Valuation: Current price correction of 28.67% from 52-week high creates entry opportunity at more reasonable levels
- Institutional Participation: 21.54% institutional holdings with 23 FII investors indicates quality investor base and potential support
- Recent FII Interest: Significant FII stake increase from 0.37% to 12.47% in Q3 FY26 demonstrates growing institutional confidence
Key Concerns
- Weak Capital Efficiency: Average ROE of 9.51% and ROCE of 10.87% indicate poor management efficiency in generating returns on capital deployed
- Single Hospital Risk: Concentration in one facility in Gurugram limits growth potential and creates operational risk compared to multi-facility chains
- Promoter Stake Reduction: Significant 8.10 percentage point decline in promoter holding from 66.53% to 58.43% raises questions about confidence
- High Promoter Pledging: 44.53% of promoter shares pledged indicates potential financial stress and governance concerns
- Severe Stock Underperformance: One-year decline of 23.52% vs Sensex gain of 5.37% represents 28.89 percentage points of negative alpha
- High Volatility: Beta of 1.35 and volatility of 36.86% create "high risk, low return" profile for recent investors
- Declining Domestic Institutional Interest: Mutual fund and insurance holdings declining, with insurance stake dropping to zero
- Growth Sustainability Questions: Margin expansion opportunities largely captured; future growth dependent on volume expansion and potential new facilities
Outlook: What to Watch Going Forward
Positive Catalysts
- ROE Improvement: Sustained enhancement in return ratios above 15% would justify current valuation and attract quality investors
- Capacity Expansion: Announcements of new facilities or bed additions would address single-hospital concentration risk
- Margin Sustainability: Maintaining operating margins above 18% for multiple quarters would demonstrate structural improvement
- Promoter Pledge Reduction: Decrease in pledged shares would improve governance perception and reduce overhang concerns
- Institutional Accumulation: Continued FII buying and return of domestic institutional investors would provide price support
Red Flags to Monitor
- Margin Compression: Any decline in operating margins below 16% would indicate competitive pressure or operational challenges
- Further Promoter Dilution: Additional reduction in promoter stake below 55% would raise serious governance concerns
- ROE Deterioration: Decline in ROE below 9% would confirm structural capital efficiency problems
- Debt Increase: Any significant rise in leverage or loss of net cash position would reduce financial flexibility
- Volume Growth Slowdown: Stagnant or declining patient volumes would question growth sustainability beyond margin expansion
The Verdict: Hold Position with Cautious Outlook
Score: 54/100
For Fresh Investors: Not recommended for fresh purchases at current levels. Whilst the Q3 FY26 results demonstrate strong operational momentum with 40.84% QoQ profit growth and improving margins, the company's weak return ratios (ROE: 9.51%, ROCE: 10.87%) do not justify the current valuation. The significant promoter stake reduction and high pledging levels (44.53%) raise governance concerns. Wait for sustained improvement in capital efficiency metrics or a more meaningful price correction before initiating positions.
For Existing Holders: Continue to hold positions but closely monitor return ratio trends and promoter actions. The company's net cash position, improving margins, and strong FII interest provide some comfort. However, set a stop loss at ₹208 (52-week low) to protect against further downside. Consider partial profit booking if the stock rallies above ₹270, as multiple resistance levels exist between ₹250-₹265. Re-evaluate the investment case if ROE consistently remains below 10% or promoter stake falls below 55%.
Fair Value Estimate: ₹255-₹265 (6.40%-10.57% upside from current price of ₹239.60)
Rationale: The HOLD rating reflects a balanced assessment of strong recent operational performance against structural concerns about capital efficiency and single-hospital concentration risk. Whilst the company demonstrates positive financial momentum and attractive valuation metrics, the weak return ratios and governance concerns prevent a more bullish stance. The stock requires demonstration of sustained ROE improvement above 12% and clarity on expansion plans to merit a BUY recommendation.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The views expressed are based on publicly available information and are subject to change without notice.
