Stock To Buy: Apollo Hospitals Revenue Rallied 14%, Profitability Up 18%, With $2.5bn Fundraising plan

Top brokerage firm Prabhudas Lilladher has given a buy rating to the stock of Apollo Hospitals Enterprise. The company's fund-raising plan of $200mn will likely take place by end of FY23 at valuation of $2.5bn. Additionally, in Q2 FY23, its consolidated revenue increased 14.4% year-on-year (YoY) to Rs. 4,251 crore, while hospital profitability was up 18% QoQ.

Stock To Buy: Target Price

The Current Market Price (CMP) of Apollo Hospitals is around Rs. 4,546.35. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 5400. This stock has the potential to give an 18.78% return, in the upcoming 12 months.

Stock Outlook
Current Market Price (CMP)	Rs. 4,546.35
Target Price	Rs. 5400
Potential Upside	18.78%
52-week high share price	Rs. 5,935.40
52-week low share price	Rs. 3,361.55

EBITDA and net debt

Apollo hospitals enterprise's (APHS) consolidated EBITDA declined 8% to Rs. 5.6bn, in line with our estimate. Adjusted for 24x7 losses, EBITDA was at Rs. 7.4bn, up 18% QoQ vs our est of Rs. 7.1bn. EBITDA from offline pharmacy (SAP) increased 38%, while AHLL declined 39% YoY given high base. Overall occupancy stood at 68% vs 60% in Q1. ARPOB remained healthy at Rs.50K, down 3% QoQ due to case mix. Net debt increased by Rs. 2.4bn QoQ to Rs. 12.3bn, the brokerage firm said.

Stock Valuation

Maintaining a buy rating, Prabhudas Lilladher said, "The company also has good presence in offline format, making it more of a formidable player than just pure play online companies. Though stake sale in Apollo HealthCo has been delayed, scale up in business is on track. We ascribe 22x EV/EBITDA multiple to hospital segment, 25x EV/EBITDA to offline pharmacy and 20x EV/EBITDA to AHLL. Overall we estimate 19% EBITDA CAGR over FY22-25E an assign zero value to the 24/7 business. Recommend buy at SOTP based TP of Rs5,400 (Rs5,000 earlier) as we roll forward."

Segment-wise growth

Hospitals - APHS guided occupancy closer to 70% over next 12 months. Mgmt anticipates 100-150bps for matured and 200 bps margin improvement for new hospitals.

Bed Expansion - addition of 2000 beds over 3-4 years at a capex of Rs30bn across Mumbai, Gurgaon, Bangalore and Chennai markets. Maintenance capex of Rs. 3.5bn annually.

Payor mix- Share of international patients to reach 10% by end of H2FY23 and 15% by FY24; which currently contributes 6% to the total revenues. Revenue from insurance segment jumped up from 35% to 42% in Q2.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.