Buy Apollo Hospitals Enterprise Ltd For Target Rs.7,400 - Motilal Oswal Financial Services Ltd
Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel
https://t.me/InvestmentGuruIndiacom
Download Telegram App before Joining the Channel
Better realization drives healthcare performance
Healthco achieves break-even in 3Q
* Apollo Hospitals (APHS) delivered marginally better-than-expected performance for 3QFY24. Healthy growth in ARPOB/in-patient volume and EBITDA break-even in Healthco (digital health and pharmacy distribution) has led to superior profitability despite 3Q traditionally considered to be a seasonally weaker quarter.
* We raise our earnings estimate by 3%/2% for FY25/FY26, factoring a) the faster turnaround of the Apollo 24/7 business, b) initiatives aimed at enhancing occupancy rates, and c) tariff hikes in the institutional patient category. We value APHS on SOTP basis (27x 12M forward EV/EBITDA for healthcare services, 12x 12M forward EV/EBITDA for backend pharmacy, 20x 12M forward EV/EBITDA for front-end pharmacy, 2x EV/sales for Apollo 24/7 and 25x EV/EBITDA for AHLL) to arrive at a price target of INR7,400.
* APHS is implementing efforts across segments – adding 2K beds over the next three years, improving payor mix to drive better ARPOB, and building tailwinds for GMV growth as well as improve operational efficiency. This would drive 15%/23% revenue/EBITDA CAGR over FY24-26. We reiterate our BUY rating on the stock.
ARPOB growth/improved traction in Healthco drives overall margins
* APHS 3QFY24 revenues grew 14% YoY to INR48.5b (est. INR47b). ? EBITDA margin expanded 80bp YoY to 12.7% (our est: 12.6%) due to lower employee/other expenses (down 60bp/40 YoY as a percentage of sales) offset by higher RM cost (+20 bp YoY as a percentage of sales).
* EBITDA grew 21% YoY to INR6.1b (our est: INR5.9b). ? Adj. PAT grew 60% YoY to INR2.5b (our est: INR2.4b).
* In 9MFY24, Revenue/EBITDA/PAT grew 15%/12%/24% YoY to INR141b/ INR17.5b/INR6.4b.
* Hospital segment revenue grew 12% YoY to INR24.6b, driven by volume growth of 7.7% YoY and price/case mix growth of 4.3% YoY.
* Hospital segment EBITDA margin contracted 90bp YoY to 23.8%.
* HealthCo revenue grew 17% YoY to INR20.5b during the period.
* AHLL’s revenue grew 8% YoY to INR3.4b.
Highlights from the management commentary
* APHS guided for GMV to grow 75% YoY to INR28b for FY24. It expects 60- 70% YoY growth in GMV in FY25. 3Q has been an exceptional period in terms of GMV and we anticipate improvements going forward.
* APHS remains confident of achieving 14% YoY growth in revenue in healthcare services in FY24. It expects to achieve 15% YoY growth in healthcare services revenue in FY25.
* With health-co EBITDA break-even in 3QFY24, it expects Apollo 24/7 to achieve EBITDA break even in six to eight quarters
For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412
