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Apollo hospitals enterprise (APHS) reported consolidated EBITDA of Rs 6.13bn (up 21% YoY) in-line with our estimates. Adjusted for 24x7 losses and ESOP cost (~Rs1.6bn), EBITDA was at Rs 7.7bn, up 9% YoY. We believe APHS has created a solid growth platform across segments and digital foraying has further made it a strong Omni channel play. The company also has good presence in offline format, making it more of a formidable player than just pure play online company. Scale up in Apollo HealthCo has been on track with likely break even in EBITDA of digital business over next 6-8 quarters. Our FY25E and FY26E EBITDA broadly remain unchanged. Overall we estimate 16% EBITDA CAGR over FY24-26E (ex 24x7). Maintain ‘BUY’ rating with revised TP of Rs. 7,050/share (earlier Rs6,000/share) as we roll forward. We ascribe 25x EV/EBITDA multiple to hospital and offline pharmacy, assign 1x sales to the 24/7 business.

*  In-line EBITDA; HealthCo achieves break-even : Consolidated EBITDA at Rs6.13bn was broadly in-line with our estimate. 24x7 digital app expenses were at Rs1.4bn (Rs1.6bn in Q2) and additional Rs142mn of ESOP related non-cash expenses in Q3. Pharmacy OPM adjusted for 24x7 app exps declined 20 bps YoY at 7.7%. Apollo Healthco achieved breakeven with positive EBITDA of Rs. 20mn. Overall hospital EBITDA growth was moderate at 8% YoY with OPM of 23.8% (down 90bps YoY), due to seasonality and Chennai cyclone. AHLL reported EBITDA of Rs259mn (up 2% YoY) with 7.7% OPM.

* Lower occupancy due to seasonality ; healthy ARPOB : Overall occupancy stood at 66% vs 68% in Q2. ARPOB de-grew 2% QoQ and improved 10% YoY to Rs.56.4K. Overall consol revenues grew by 14% YoY while hospital revenues grew by 12% YoY. Net debt was largely flat QoQ to Rs 15.5bn.

*  Key con-call takeaways :

(1) Bed expansion – Progressing well with total expansion of 2,000 beds over the next 4 years at capex of Rs. 30bn. In FY25, hospitals will operationalize in Pune, Hyderabad and Kolkata along with brownfield expansion in Bangalore. New hospitals will operationalize towards end of FY25 and thereby will have minimal losses in FY25.

(2) Mgmt guided revenue for hospital segment to grow at 14% for FY24 and 15% for FY25. In Q3, volume growth has contributed about 50% to revenue growth while the remaining contributed through pricing, payor and case mix improvements.

(3) Guided for margin improvement in hospital segment of 200 bps over next few quarters aided by increasing inpatient volume, better case mix and scale up in occupancy to 70%.

(4) Apollo 24x7 - GMV decreased 9% QoQ to Rs6.6bn. Earlier GMV guidance was at Rs. 30bn for FY24; now changed to Rs 27-28bn. Guided for 60-70% growth in GMV in FY25. Digital business guided to breakeven in 6-8 quarters.

(5) HealthCo – On track to achieve Rs100bn of revenues with Rs 10bn of EBITDA in HealtCo

(6) AHLL - Double digit growth of 20% guided Q1FY25 onwards. Current quarter EBITDA was subdued led by ongoing network expansions as well as relocation of cradles and spectra units

(7) Payor mix-Insurance contributes 43% to total revenues.

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