Buy Apollo Hospitals Enterprise Ltd For Target Rs.9,000 By Choice Broking Ltd
APHS Drives Growth Across Core Segments: APHS is poised for sustained growth, with its hospital segment expanding capacity from 10,187 to ~14,560 beds over the next 4–5 years while maintaining ~24% EBITDA margins. AHLL is targeting ~15% revenue CAGR with ~200bps margin uplift, driven by accelerated growth in primary care and diagnostics. HealthCo aims to deliver ~20% revenue CAGR, leveraging deeper penetration into high-potential emerging cities so as to capture market share.
View and Valuation: We maintain our estimates and introduce FY28E projections. We forecast revenue/EBITDA/PAT to expand at a CAGR of 19.8%/25.4%/34.2% over FY25–28E. Valuing the stock on an average of FY27- 28E SoTP valuation, we arrive at a revised target price of INR 9,000 (earlier INR 8,000), maintaining our BUY rating. We value Hospitals at 20x EV/EBITDA, AHLL at 10x EV/EBITDA and HealthCo at 3x EV/EBITDA (maintained) (refer Exhibit 2).
* Hospital segment revenue is expected to grow through capacity expansion, with plans to add ~43% more beds to the existing capacity (10,187 beds),
* The Pharmacy business is set to achieve 20% yearly revenue growth, by expanding its footprint, from 6 major cities to 25 cities,
* The Diagnostics business is projected to expand at a CAGR of ~15%, supported by strategic alliances with insurers.
Results in line with estimates and saw significant YoY growth on all fronts
* Revenue came at INR 58.4Bn (vs. CIE est. at INR 59.1Bn), up 14.9% YoY and 4.5% QoQ, driven by better case mix.
* EBITDA came at INR 8.5Bn (vs. CIE est. at INR 8.2Bn), up 26.2% YoY and 10.7% QoQ. EBITDA margin came at 14.6% (vs. CIE est. of 13.9%).
* PAT came at INR 4.3Bn (vs. CIE est. of INR 4.2Bn), up 4.8% YoY and 11.1% QoQ, with a PAT margin of 7.4%.
APHS expands ~20% capacity, maintains +24% EBITDA margin
APHS plans to add 1,937 beds in FY26, expanding capacity by ~20%, with a focus on high-growth cities including Pune, Kolkata, Delhi-NCR, Hyderabad and Gurugram. Backed by strong execution, new facilities, mainly Kolkata (270 beds) and NCR (510 beds), EBITDA projected to reach breakeven in 12 months, aided by the APHS’s established presence. Management plans to add 4,300 beds over the next 4–5 years, with an INR 76,000Mn investment. We believe that, despite expansion, APHS will sustain +24% margins through cost-efficiencies and payer mix optimisation, offsetting the early dilution of new hospitals.
Diagnostics and Pharmacy poised for strong margin gains
APHS’s diagnostics and pharmacy divisions are set for strong growth, with diagnostics targeting ~15% revenue CAGR and pharmacy expected to expand at 20% annually. Strategic tie-ups with insurers shall boost profitability and drive operating leverage. The pharmacy segment is on track to achieve a 5–6% EBITDA margin by FY28, while the diagnostics business aims for a 200bps margin improvement. Over the next 2 years, pharmacy operations will expand from the current 6 core markets, which contribute 80% of revenue, to 25 highpotential cities.
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