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Apollo Hospitals Enterprise Ltd>
  • CMP : 6,259.6 Chg : 89.55 (1.45%)
  • Target : 5,460.0 (21.68%)
  • Target Period : 12-18 Month

16 Feb 2023

Stable numbers amid seasonality impact...

About The Stock

Apollo is a leading integrated healthcare service provider.

  • Group capacity of 10006 beds across 71 hospitals in India. Total 9385 beds owned in 48 hospitals; 278 beds in 11 cradles; 244 beds in 11 day-care/short surgical stay centres; 851 beds in five hospitals under O&M contracts
  • It has got a digital presence with “ASK Apollo” & digital health platform “Apollo 24/7”. Apollo Hospitals is the exclusive supplier for APL, which operates India’s largest standalone pharmacy chain with 4529 outlets
  • Apollo Health & Lifestyle runs the largest chain of standardised primary healthcare models, multi-specialty clinics under the brand: Apollo Clinics in India and Middle East, diabetes management clinics: Apollo Sugar, diagnostic centres: Apollo Diagnostics, specialty formats: Apollo Cradle for women & children, Apollo Spectra for planned surgery

Revenues were in line but margins were lower than estimated.

  • Revenues came in at ₹ 4263.6 crore, flat QoQ. Positive growth in pharmacy business was nullified by negative growth in healthcare (seasonality impact)
  • EBITDA corrected 10.6% QoQ to ₹ 505.4 crore. EBITDA margins declined 145 bps QoQ to 11.9% due to higher 24x7 and Esop charge
  • Adjusted net profit declined 25% QoQ to ₹ 153.6 crore
What should the investors do?

Apollo’s share price grew at 38% CAGR over the past three years.

  • We maintain BUY due to 1) pick-up in elective surgeries and margins at hospitals to improve through better operating leverage, optimisation of payer and case mix, 2) impending value unlocking through Apollo HealthCo and 3) increase in reach for all verticals through integrated digital platform to be remunerative in the long term albeit with front-loaded cost pressure
Target Price and Valuation

We value Apollo at ₹ 5460 based on SOTP valuation.

Key triggers for future price performance:

Apollo is undergoing an optical transformational journey towards creating an omni-channel healthcare platform that could set the platform for tapping new-age investors enabling rapid scale up of the digital healthcare platform

  • Business normalisation in healthcare is expected to continue with further momentum due to lifting of travel restrictions, international patients
  • The new hospitals, ventures are turning profitable on the back of a judicious case mix besides better occupancy and ramp up at new hospitals and AHLL
Alternate Stock Idea

Apart from Apollo, in our hospital coverage we like Narayana.

  • Narayana operates a duel model, which perfectly blends established ‘’Asset right’’ India business with a hospital in Cayman Islands
  • BUY with a target price of ₹ 870

Key Financial Summary

Particulars FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E FY25E 2 Year CAGR (FY23E-FY25E)
Net Sales 11,246.8 10,560.0 14,662.6 15.1 16,730.1 20,475.7 23,168.6 17.7
EBITDA 1,583.4 1,137.4 2,185.1 24.6 2,120.1 2,564.9 3,414.2 26.9
EBITDA margins (%) 14.1 10.8 14.9 - 12.7 12.5 14.7 -
PAT 454.9 113.0 850.4 36.7 886.4 1,155.1 1,825.1 43.5
EPS (|) 22.5 7.8 59.1 - 61.6 80.2 126.7 -
PE (x) 142.0 429.6 61.2 - 72.8 55.9 35.4 -
P/BV (x) 19.4 14.0 11.4 - 10.2 8.9 7.4 -
RoE (%) 9.7 2.5 15.1 - 14.0 15.9 21.0 -
RoCE (%) 10.2 6.3 15.1 - 14.3 16.6 21.7 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q3FY23 Results: Revenues in line but margin below par

  • Revenues came in at | 4263.6 crore, flat QoQ. Driven by Digital Health and Pharmacy Distribution business (modified erstwhile pharmacy segment). EBITDA corrected 10.6% QoQ to | 505.4 crore. EBITDA margins declined 145 bps QoQ to 11.9%. Delta in EBITDA margins was due to lower-thanexpected diagnostics and retail health margins and higher-than-expected 24/7 operating costs. Healthcare revenue declined 3.1% QoQ to | 2194.4 crore. Margin performance of hospitals came in at ~25% (matured-27.5%, new- 18.2%). Pharmacy revenues increased 5.4% QoQ to | 1757.8 crore, mainly due to 194 store additions taking the count to 5196 stores. Diagnostics and retail healthcare revenues were down 2.2% QoQ to | 311.4. Such a decline was attributed to Covid vaccination revenues. Adjusted PAT declined 25% QoQ to | 153.6 crore
  • The highlight for the healthcare business in this quarter (despite seasonality impact due to festive quarter) was stability in ARPOB level at | 51482. Pharmacy business delivered a strong performance with addition of 194 stores followed by growth in GMV of Apollo 24/7 that increased to | 543 crore up 85% QoQ. Structurally, cost reduction drives, expanding of complex procedures and profitability of new hospitals remain key management focus area

Q3FY23 Earnings Conference Call highlights


  • Apollo Hospitals had 7,855 operating beds across the network (excluding AHLL & managed beds)
  • The new hospitals utilisation was above 62% and, moving forward, doubledigit volume increase is anticipated along with improvements in utilisation and profitability
  • Revenue of existing hospitals came in at | 1542 crore, down 3.1% QoQ whereas for new hospitals it came in at | 652, down 3% QoQ
  • Tamil Nadu: Revenues grew 10%. IP volumes remained flat. ARPOB grew 17% to | 64,421. Occupancy was at 63%
  • AP Telangana: Revenues grew 4%, IP volumes grew 7%. ARPOB grew 11% to | 51,595. Occupancy was at 56%
  • Karnataka region delivered an improved performance. Occupancy was at 63%
  • Group level ARPOB grew 12% to | 51482 in Q3FY23 


  • Diagnostics revenues were at | 94 crore, down ~10% QoQ, primary Care revenues at | 87 crore, down marginally by ~1% and specialty care at ~| 148 crore, up 3.4%
  • Offline pharmacy distribution revenues came in at | 1581 crore in Q3FY23 while revenues from the digital platform were at | 177 crore
  • Hospital IP & OP contributed most of the growth in Q3FY23
  • GMV of Apollo 24/7 improved significantly at | 543 crore in Q3FY23
  •  The run rate for pharmaceutical, diagnostic and consultation transactions in December was about 42,000/day

Update on launches:

  • It unveiled the Apollo Clinical Intelligence Engine (Apollo CIE), a breakthrough in digital healthcare to help doctors with primary care, condition management, home care and wellness promotion
  • Apollo Hospitals, Seshadripuram, Bangalore, introduced MRI Fusion TRUS guided Trans-Perineal Targeted Biopsy, which is a cutting-edge method to increase the accuracy of cancer detection by 95% to 97%
  • Entered into a partnership with Anara Health to offer medical concierge services to non-resident Indian families, based in India  The Apollo Genomics Institute was established in Navi Mumbai to offer comprehensive care to individuals and families dealing with genetic abnormalities


I/We, Siddhant Khandekar-Inter CA, Kushal Shah-CFA L1, CFP, Utkarsh Jain -MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

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Sell: <-15%

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ICICI Direct Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 research@icicidirect.com

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