Accumulate Apollo Hospitals Enterprise Ltd for Target Rs 9,470 by Elara Capital
On steady growth path
Apollo Hospitals Enterprise (APHS IN) reported Q 2FY2 7 revenue, EBITDA and PAT 2-4% ahead of our estimates . The beat came primarily from superior growth and margin in the Hospitals segment. Overall r evenue for the Hospitals business grew 23% YoY, driven by healthy occupancy, pricing and case mix . Newly -added beds ramped up in line with expectations. The management is confident of sustaining hospital margins despite aggressive bed additions The segment sustained similar EBITDA margin YoY despite losses from new facilities. Apollo HealthCo continued to im prove, aided by margin expansion in the legacy business and reduction in Apollo 24/7 expenses . AHLL too delivered healthy growth (adjusted for divestment of “Cradle”) , led by strong momentum in diagnostics and specialty care. We broadly maintain our FY27E -29E core EPS estimates. We retain Accumulate with TP unchanged at INR 9, 470.
Hospitals business – Healthy growth momentum maintained:
Revenue from the Hospitals business grew 23% YoY . V olume growth, case mix improvement and better pricing helped . Despite the addition of ~15% beds in the past year, EBITDA margin has sustained in the 24 - 25% range, which is commendable . More bed additions are coming up in H2FY27, but management is confident of sustaining overall margin for the business at similar levels.
Long runway for growth:
APHS has ongoing plans to add ~6 ,000 beds in FY27 -31 on a base of ~ 10,000 beds. The next large addition would be in the form of 500 beds in greenfield Gurgaon facility in Q4FY27.
HealthCo – Profitability continues to improve:
Revenue was up 2 3.5% YoY and EBITDA margin improved 90bps YoY (excluding Apollo 24/7 expenses). Apollo 24/7 losses are reducing as well – the operation has achieved break even . The scheme of arrangements with KeiMed and separate listing of the entity are under process and management targets to complete these in Q4FY27 .
AHLL – Strong performance:
The Health & Lifestyle business delivered strong performance as well, with EBITDA growing 23% YoY (reported revenue was down YoY due to planned divestiture of “Cradle” business) . The Diagnostics business is becoming the focus area of growth – this part of the business is growing at 20%-plus. We see potential value unlocking in this business as well in the medium term.
Retain Accumulate; TP maintained at INR 9,470:
We maintain our FY27E -29E core EPS estimates . APHS trades at 49.7 x FY27E and 39.8x FY2 8E core P/E ( 28.7x FY27E and 24.7 x FY2 8E EV/EBITDA pre -IndAS) . We maintain our TP at INR 9,470 (37.5x FY2 9E core earnings plus cash per share ). We retain Accumulate . Adverse regulations, i ncreased competition , slower ramp -up in new facilities and weaker -than -expected profitability improvement at Apollo 24/7 are key risks to our call.
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SEBI Registration number is INH000000933
