Buy Apollo Hospitals Enterprise Ltd For Target Rs.9,600 By Choice Institutional Equities
Key Conference Call Highlights
Hospital Business
* Hospital business delivered a strong Q4FY26 revenue growth of 16% YoY, driven by 7% inpatient volume growth, a 5% improvement in case mix and a 4% price hike
* Commissioned 4 new hospitals (~855 Census beds); operationalised 185 beds and remaining 670 beds would be operationalised in the next 12–18 months.
* The management anticipates that established hospital margin will improve by, at least, 100 basis points in FY27E, targeting sustainability at around the 25.5%-level seen in Q4FY26.
* The company expects around 500–600 beds to become operational by mid-FY27, while Sarjapur and Gurugram hospitals are scheduled for commissioning in the next two quarters.
* New hospitals are projected to have an EBITDA loss of INR 1500 Mn in FY27E. The new hospital cluster is expected to break even by FY28E.
* Mid-teen revenue growth is guided for FY27E, aided by ramp-up of new hospitals and continuing investments in clinical programs.
* The company expects all ~1,400 under-construction beds to be fully operationalised by FY28, with the new hospital cluster targeted to break even at around 50–55% occupancy levels.
* Strong ramp-up potential in key markets, such as Gurugram, Hyderabad and Sarjapur, supported by established doctor networks and favourable demand conditions.
Diagnostic Business
* Announced the combination of Apollo Cradle and Fertility business with Cloudnine, valued at INR 15,500 Mn at 35x EBITDA, with APHS receiving cash and a 9.9% equity stake; the transaction is expected to close in Q2FY27, pending CCI approval.
* Plans to deploy proceeds from the Apollo Cradle and Fertility transaction into primary care, diagnostics and specialty care expansion initiatives.
* Plans to aggressively scale up diagnostics and primary care across metro and non-metro markets, positioning the segment as a key patient acquisition funnel for the Apollo ecosystem.
* The diagnostics business growth is being supported by higher lab utilisation, expansion in B2B business and cross-selling opportunities through the Apollo ecosystem.
Pharmacy Business
* Apollo 24/7 expects sustainable growth of 25–35% in new business without significant marketing spend, driven by omni-channel integration and cross-pollination across pharmacy, diagnostics and hospitals. * The management guided for Apollo 24/7 to achieve cash breakeven excluding ESOP cost in Q1FY27 and full reported breakeven by Q3FY27
* The offline pharmacy business is targeting a steady-state EBITDA margin of 8% to 9% as it matures and increases the penetration of higher-margin private labels
* Apollo HealthCo is targeting an annualised revenue run rate of INR 250 Bn by Q4FY27 with 6.5–7% exit EBITDA margin by FY27E, led by private label growth, digital breakeven and operating leverage benefits.
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