 "Post solid Q1, Apollo Hospitals on track for all-round growth, say analysts | News on Markets")
Prathap Chandra Reddy, Founder and Chairman, Apollo Hospitals Group (Photo credit: Pratap Vinayagam)
Shares of Apollo Hospitals Enterprise (AHEL) rose 2.92 per cent to Rs 6,711.95 per share on the BSE in Friday’s early morning trade. This came after analysts remain bullish on the healthcare service providers growth outlook post a staggering performance in the April-June quarter of the financial year 2024-25 (Q1FY25).
The Q1 financial performance was in line with the street estimates, helped by reduced operational costs by the hospital chain. However, hospital margins were flat year on year at 23.6 per cent, analysts noted.
The hospital business growth in Q1 was largely driven by higher volume of in-patients and out-patients, while its arm Apollo Health & Lifestyle Limited (AHLL) continued to post healthy sales and profitability across diagnostics, primary and secondary care segments, analysts at Motilal Oswal said.
The company’s online pharmacy business, Apollo 24/7 grew 15 per cent Y-o-Y, however, its gross merchandise value remained muted at Rs 690 crore, brokerage firm Nuvama Institutional Equities said.
“The hospital chain’s marketing efforts coupled with insurance tie-ups have led to impressive 68 per cent occupancy in Q1. Addition of 1500 beds in the next five quarters shall ensure sustained growth momentum,” said Aashita Jain, Shrikant Akolkar, and Gaurav Lakhotia of Nuvama.
Vital signs
Apollo Hospitals is focusing on refurbishing acquired hospitals, obtaining regulatory approvals for new projects, and optimising its online pharmacy business, Apollo 24/7 platform.
Nuvama further highlighted that despite challenges in Q1, such as store openings affected by elections and a heatwave, the company’ guidance of 500–550 new stores for FY25 remains intact. This is expected to drive a 20 per cent growth in the Apollo Pharmacy business.
Analysts at the brokerage are positive about the company’s growth prospects, anticipating a 15 per cent CAGR in hospital revenue and Ebitda over FY24–27.
Despite a 150 basis point impact on hospital margins in FY26 from expansion, they remain optimistic long-term. They retained a ‘Buy’ rating with a revised target price of Rs 7,500, up from Rs 7,065.
Analysts at Motilal Oswal, too, maintained their ‘Buy’ call on the stock with a target price of Rs 7,940 per share. They project a 21 per cent Ebitda CAGR and a 41 per cent earnings CAGR between FY 24-26.
The global brokerage firm HSBC also maintained ‘Buy’ on the company at a price of Rs 7,215.
Q1 earnings show
AHEL reported a substantial 83 per cent increase in net profit for the first quarter of FY 2024-25, reaching Rs 305 crore, compared to Rs 167 crore in the same period last year. The company’s revenue also saw a significant rise, up 15 per cent to Rs 5,086 crore from Rs 4,418 crore. Additionally, consolidated Ebitda grew by 33 per cent year-on-year, totaling Rs 675 crore, reflecting strong operational performance.
At 12:03 PM; the stock of the company was trading 1.50 per cent higher at Rs 6,618.90 per share on the BSE. By comparison, the BSE Sensex rose 1.11 per cent at 79,983 levels.
First Published: Aug 16 2024 | 12:07 PM IST
