Target: ₹8,020
CMP: ₹7,073.40
Apollo 24/7 has launched insurance products on its online platform. It would be launching concierge service on its online platform as well. This would aid strong surge in GMV as well as expand margins of Apollo healthco (AHL).
Apollo Hospitals Enterprises has chalked out plans to add 2,860 beds over next 3 years in current base of 7,942 operating beds. Also, the occupancy remains at elevated level at 68-69 per cent, driving improved margins in hospital business as well.
In the physical format, APHS plans to add about 570 Apollo 24/7 stores in 2HFY25. These measures is expected to provide comprehensive healthcare services to patient pool.
We expect 20/18 per cent EBITDA/PAT CAGR over FY24-FY27 fueled by adding newer offerings and controlled cost driving better profitability of Healthco; higher number of patients being treated through adding beds/better occupancy; and healthy execution in diagnostic business.
We value the stock on an SOTP basis (32x 12M forward EV/EBITDA for the hospital business, 14x EV/EBITDA for the retained pharmacy, and 25x EV/EBITDA for AHLL, 22x EV/EBITDA for front end pharmacy and 2x EV/sales for Apollo 24/7) to arrive at our TP of INR8,020. Reiterate BUY.