Apollo Hospitals Q1 Results Review - Superior Execution Across Segments: Motilal Oswal

Motilal Oswal Report

Apollo Hospitals Enterprise Ltd. delivered in-line Q1 FY25 performance. The hospital business was largely driven by higher volume of in-patients/out-patients, while Apollo Health and Lifestyle Ltd. continued to post healthy sales/profitability across diagnostics, primary and secondary care segments. Apollo Hospitals continued to reduce operational costs at Healthco. However, gross merchandise value growth moderated.

We raise our FY25 earnings estimate by 4%, factoring in better profitability in Apollo Health and Lifestyle and reduced opex in Apollo 24/7.

We value Apollo Hospitals on SOTP basis (30 times 12 months fwd enterprise value/Ebitda hospital business, 12 months fwd enterprise value/Ebitda for Apollo Health and Lifestyle, 22 times 12 months fwd enterprise value/Ebitda for front end pharmacy) to arrive at a target price of Rs 7,940.

The company is implementing efforts to commission acquired hospitals after refurbishing/adding medical equipment, get regulatory approval for its greenfield hospital project, and optimize Apollo 24/7 business. Accordingly, we estimate a 21% Ebitda compound annual growth rate and a 41% earnings compound annual growth rate over FY24-26.

Maintain 'Buy'.

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