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Beat led by operating leverage; segments grow in tandem 24/7 breakeven pushed to 3Q on certain strategy reset

* Apollo Hospitals and Enterprises (APHS) delivered largely in-line revenue and better-than-expected EBITDA/PAT (6%/5% beat) in 1QFY27. The beat was driven by improved operating leverage on the back of robust volume of patients treated, healthy progress in footfalls and average realization per patient in diagnostic segment, and a further reduction in losses from the digital platform.

* Hospital segment’s strong performance was driven by healthy 11% volume growth in acute, 4% pricing growth and 3% improvement in case mix/payor mix.

* EBITDA breakeven in online pharmacy/distribution and Apollo 24/7 is expected by 3Q-end as APHS is revisiting its strategy related to feet on ground.

* On the combined (offline+online+kiemed) pro forma basis, revenue/EBITDA stood at INR53.4b/INR3.0b for the quarter.

* The diagnostic business saw a strong improvement in financial performance with 31%/136% YoY growth in revenue/EBITDA.

* We slightly raise our earnings estimates by 2%/3% for FY27/FY28, factoring in improved patient volume growth and enhanced efforts to achieve profitability in the online platform.

* We value APHS on an SoTP basis (30x EV/EBITDA for the hospital business, 25x EV/EBITDA for offline pharmacy, 24x EV/EBITDA for AHLL, and 2x EV/sales for Apollo 24/7) to arrive at our TP of INR10,160 on a 12-month roll-forward basis. Maintain BUY.

EBITDA outgrows revenue even as new hospitals drag

* 1QFY27 revenue grew 20.6% YoY to INR70.4b (our est: INR69.2b).

* EBITDA margin expanded by 200bp YoY to 15.5%.

* EBITDA rose 28.2% YoY to INR10.9b (our est: INR10.3b).

* Adj. PAT was up 34.2% YoY at INR5.8b (our est: INR5.5b).

Hospital occupancy and HealthCo profitability improve further

* Healthcare services revenue grew 22% YoY to INR35.7b.

* Hospital EBITDA rose 20% YoY to INR8.6b.

* Occupancy was 70% vs. 65% in 1QFY26.

* Healthco revenue grew 20% YoY to INR29.8b.

* Healthco achieved strong EBITDA of INR1.7b in 1QFY27 vs. INR940m YoY. EBITDA margins stood at 6%.

* Platform GMV grew 23% YoY to INR5.4b.

* 151 new stores were opened in 1QFY27, taking the total to 7,440 stores.

* Average run rate increased by 9% YoY to 70k/day order across pharmacy, diagnostics and consultations, including IP/OP referrals.

* AHLL revenue grew 15% YoY to INR5b. EBITDA rose 47.5% YoY to INR590m.

* Diagnostic/Spectra revenue stood at INR2b/INR800m for the quarter.

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