Prabhudas Lilladher
Target: ₹5,000
CMP: ₹3,722.90
Apollo Hospitals Enterprise’s (APHS) consolidated EBIDTA grew 11 per cent to ₹410 crore, below our estimate of ₹490 crore, impacted by lower profitability in hospital segment and higher losses from 24x7. We expect hospital profitability to normalise from Q1-FY23, while losses from 24x7 are likely to remain at elevated levels in FY23.
APHS pursued aggressive expansion in the past few years which has created a strong growth platform. APHS digital foray makes it a strong omni-channel play and given strong presence in offline format makes the company more formidable player than pure-play online companies.
APHS anticipates healthcare business to grow mid-teens and margins to grow over 150 bps for FY23 aided by case mix, payor mix and cost optimisation strategies; expectation of total $3 billion of GMV from its offline pharmacies ($2 billion), Apollo 24*7 ($500-700 million) and Amazon partnership ($500 million) in 3-4 years; offline pharmacy expected to grow at 20 per cent on store expansion for FY23; guided for 500-store expansion in FY23.
The company guided price increase of 4-5 per cent and better case mix for FY23 which will continue to aid ARPOB. The company has cash surplus of ₹600 crore and ₹800 crore invested in mutual fund. Total ₹800 crore of capital deployment expected over the two years towards brownfield expansion.