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Strong Q1 amid Covid surge…

About the stock: Apollo is one of the leading integrated healthcare service provider with avenues like hospitals, pharmacies, primary care & diagnostic clinics.

* It has got a digital presence with “ASK Apollo” & digital health platform “Apollo 24/7”. Apollo Hospitals is the exclusive supplier for APL, which operates India’s largest standalone pharmacy chain with 4,118 outlets

* Group capacity of 10,209 beds across 71 hospitals in India. Total 8816 beds owned in 44 hospitals; 272 beds in 11 cradles; 270 beds in 11 day-care/short surgical stay centres; 851 beds in five hospitals under O&M contracts

Q1FY22 Results: Apollo reported strong Q1FY22 results.

* Sales were up 31% QoQ to | 3760 crore

* EBITDA in Q1FY22 was at | 520 crore, up 26% QoQ with margins at 14%

* Consequent adjusted PAT was at | 243 crore (up 61.7% QoQ)

What should investors do?

Apollo’s share price has grown by ~2.9x over the past five years (from ~| 1361 in July 2018 to ~| 4035 levels in July 2021).

* Given the recent run-up we change our view from BUY to HOLD

Target Price and Valuation: We value Apollo at | 4510 based on SOTP valuation.

Key triggers for future price performance:

* Apollo is undergoing optical transformational journey towards creating an omni-channel healthcare platform that could set the platform for tapping new-age investors enabling rapid scale up of the digital healthcare platform

* Business normalisation in healthcare is expected from Q2FY22 and with strong healthcare pedigree & asset base, the company is on course to integrate all entities digitally to leverage its brand and physical presence

* The new hospitals, ventures are turning profitable on the back of a judicious case mix besides better occupancy & ramp up at new hospitals and AHLL

Alternate Stock Idea: Apart from Apollo, in our hospital coverage we like Narayana

* It has 21 hospitals, five heart centres, 19 primary care facilities and a multispeciality hospital in Cayman Islands with in total 5992 operational beds

* BUY with a target price of | 620

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