Prabhudas Lilladher has given Buy recommendation for Apollo Hospitals Enterprise with a target price of Rs. 5000 in its research report issued on Aug 15, 2022

Prabhudas Lilladher’s research report on Apollo Hospitals Enterprise

Apollo hospitals enterprises (APHS) consolidated EBITDA decline by 6% to Rs4.9bn, in line with our estimate. Adjusted for 24×7 losses, EBITDA was up 12% YoY. Hospital profitability recovered QoQ with 19% EBITDA growth while losses from 24×7 remain at elevated levels. EBITDA from offline pharmacy (SAP) and AHLL decline by 3% and 39% YoY given high base. Overall occupancy stood at 60% vs 58% in Q4. ARPOB remain healthy at Rs.51K; up 7% QoQ aided by reduction in ALOS and payor mix. Net debt reduced by Rs 2.1bn QoQ to Rs 9bn. APHS pursued aggressive expansion in 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. Though stake sale in Apollo HealthCo has been delayed; scale up in business is one track. We estimate 20% EBITDA CAGR over FY22-24E. Our FY23E EBITDA stands reduced by 5% as we factor in higher losses from 24×7 however our FY24E EBTDA remain unchanged.

Outlook

We value APHS on an SOTP basis. We ascribe 22x EV/EBITDA multiple to the hospital segment, 25x EV/EBITDA to offline pharmacy and 20x EV/EBITDA to AHLL. We ascribe zero value to the 24/7 business and arrive at a price target of Rs5,000. Recommend BUY rating.

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