ICICI Direct is Apollo Hospitals has given Buy recommendation for the stock with a target price of Rs. 3870 in its research report issued on Jun 25, 2021

ICICI Direct’s research report on Apollo Hospitals

Apollo Hospital’s Q4FY21 revenues came in at Rs 2868 crore (I-direct estimate: Rs 2857.7 crore). They are not comparable YoY due to restructuring of the retail pharmacy business to pharmacy distribution (post demerger). On the other hand, the hospital segment grew 10.1% YoY to Rs 1443 crore vs. I-direct estimate of Rs 1490 crore. Pharmacy distribution segment revenues came in at Rs 1118.7 crore. EBITDA margins improved 135 bps YoY to 14.4% mainly due to lower staff cost, which likely stems from restructuring of retail pharmacy to pharmacy distribution. Subsequently, EBITDA grew 8.4% YoY to Rs 411.8 crore). Adjusted PAT for the quarter grew 106.3% YoY, 15.3% QoQ to Rs 167.9 crore. Delta vis-à-vis EBITDA was mainly due to lower depreciation, interest cost and higher other income.

Outlook

We maintain BUY with a revised TP of Rs 3870 (earlier Rs 3170) on SOTP basis by valuing healthcare business (existing hospitals & JV) at 20x FY23E EV/EBITDA, healthcare (new hospitals), pharmacy both at 3x, AHLL at 5x FY23E EV/sales, respectively.