Apollo Hospitals Enterprise Ltd. share price target

Ascribe 9x EV/EBIDTA to FY22 EBIDTA and 1x EV/sales eachtopharmacyandAHLLbusinesses;significantlybelow consensusonvaluationgiventhesubparoperatingmetrics...

The impact of Covid-19 outbreak has taken a toll on hospital stocks most of which have corrected anywhere between 20% and 50% in the last month. We spoke with a few of them to assess the impact and way forward. Large players like Apollo Hospitals have seen a significant drop in occupancy levels to 40% from 69% amid restrictions on people movement (~50% patient volume are travelling patients) and postponement of elective procedures. Fortis has also started seeing a decline in number of elective surgeries resulting in a sharp fall of ~65%, 40% in OPD, IPD volumes,...

Healthcare expansion moderates; focus on asset sweating Rapid expansion and maturity of older hospitals has kept the overall growth tempo at 12-14% per annum. After an intense capex cycle, especially during FY14-18, the company is focusing on the profitability and return ratios with calculated capex moderation. This has reflected in a marked improvement in both EBITDA margins and RoCE. The new hospitals and ventures are turning profitable ahead of schedule on the back of a judicious case mix besides better occupancy and other matrix. We expect healthcare sales to...

The pharmacy business (40% of FY19 revenues) has grown at ~22% CAGR in the last five years on the back of consistent addition of new pharmacies and timely closure of non-performing pharmacies. FY19 margins were at 5.2%. We expect the pharmacy business to grow at ~15% CAGR in FY1922E to | 5129 crore mainly on the back of new addition and improvement in...

In the last three to four years, with many frontline large cap pharma companies being hampered by structural US related & other issues, we have seen growing investors' preference for healthcare services providers. At the same time, as many as four hospitals and three diagnostic companies got listed on the bourses, thus providing a much larger basket for investors. Some peculiar factors responsible for growing interest in the hospitals space are: 1) waning high capex episodes of private hospitals after the 2008-18 capex cycle, 2) shifting focus towards assets light model for most hospital...

Healthcare expansion moderates; focus on asset sweating Rapid expansion and maturity of older hospitals has kept the overall growth tempo at 12-14% per annum. However, constant addition is likely to put some pressure on EBITDA margins and return ratios in the short to medium term. Similarly, existing hospital margins are being compressed due to 1) regulation on stent/implants pricing, 2) negative GST impact and 3) higher guarantee fees to the doctors. However, in the past, the company has demonstrated its ability to balance between expansion and profitability. We...

Margins up strongly leading to PAT growth Net sales grew 16.8% YoY to Rs. 2,234cr in Q1FY20. EBITDA, adjusted for Ind AS 116 adoption, grew ~21.0% YoY to Rs. 274cr in Q1FY20. Adjusted EBITDA margin came in at 12.3% (up 43bps YoY) due to strong performance from mature hospitals, whose adjusted EBITDA margin stood at 22.1%. Adjusted EBITDA rose 21.0% YoY to Rs....

Healthcare expansion moderates; focus on asset sweating Rapid expansion and maturity of older hospitals has kept overall growth tempo at 12-14% per annum. However, constant addition is likely to put some pressure on EBITDA margins and return ratios in the short to medium term. Similarly, existing hospital margins are being compressed due to 1) regulation on stent/implants pricing, 2) negative GST impact and 3) higher guarantee fees to the doctors. However, in the past, the company has demonstrated its ability to balance between expansion and profitability. We...

Healthcare expansion moderates; focus on asset sweating Rapid expansion and maturity of older hospitals has kept the overall growth tempo at 12-14% per annum. However, constant addition is likely to put some pressure on EBITDA margins and return ratios in the short to medium term. Similarly, existing hospital margins are being compressed due to 1) regulation on stent/implants pricing, 2) negative GST impact and 3) higher guarantee fees to the doctors. However, in the past, the company has demonstrated its ability to balance between expansion and profitability. We...

The Q3FY19 standalone operational performance was in line with Idirect estimates while net profit was lower mainly due to higher-thanexpected interest cost and depreciation Revenues grew 14.4% YoY to | 2169 crore (I-direct estimate: | 2145.8 crore) due to 13.9% growth in pharmacy to | 1011.9 crore (Idirect estimate: | 1043.2 crore) and 14.8% YoY growth in healthcare business to | 1157.3 crore (I-direct estimate: | 1102.8 crore) EBITDA margins improved 68 bps YoY to 12.3% (I-direct estimate: 12.6%) mainly due to lower other expenditure. EBITDA grew 21.1% YoY at | 267.9 crore (I-direct estimate: | 271.0 crore) Net profit grew 28.9% to | 86.9 crore (I-direct estimate: | 93.3 crore)...