Apollo Health May Take Six Quarters To Turn Profitable: Managing Director
The stock rose as much as 3.35% during the day to Rs 5,959.35 apiece on the NSE.
Shares of Apollo Hospitals Enterprise Ltd. rose over 3% on Friday after the company's consolidated net profit jumped 78% to Rs 258 crore in the fourth quarter of the financial year 2024. Managing Director Suneeta Reddy told NDTV Profit in an interview that growth in healthcare services was the highlight of the March quarter.
The profitability was boosted by lower losses at Apollo Health Co., which is expected to be profitable in six quarters from now. The company is expecting a combined margin of 9% in the digital health and pharmacy distribution vertical, according to Reddy.
In the hospital business, the average revenue per occupied bed rose 12% to Rs 59,523; the company is expecting an improvement of 7%. "We are looking at better asset utilisation in healthcare services," she said. "We are looking to take occupancy to 68–70% in FY25."
A better ARPOB should flow down to margin improvement. The multi-specialty hospital chain is also expecting volume growth of 10%, the managing director said.
Suneeta Reddy (Source: Apollo Hospitals Enterprise website)
Apollo Hospitals has huge expansion plans across the country and is adding 2,000 beds across Hyderabad, Kolkata, Gurgaon and Pune.
Currently, it has approximately 9,500 beds and out of the additional capacity, 1,000 are expected to come on stream in the current fiscal. These will add an incremental revenue of 25%, according to Reddy.
She underscored that private insurance and medical tourism from abroad would drive earnings growth. Private insurance is currently at 40% in the company's payor mix. International medical tourism contributes 7% to its revenue and Apollo Hospitals is planning to take its contribution to 10% in the current fiscal.
Morgan Stanley has rated the company's stock overweight with a target price of Rs 7,181, implying a potential upside of 25% from the previous close.
Faster ARPOB growth, faster Ebitda breakeven for the 24/7 digital platform, ramp-up in diagnostics and value-accretive mergers and acquisitions are the key catalysts for upside, according to Morgan Stanley.
Downside risks include slower ramp-up of new beds, delayed Ebitda breakeven for Apollo Health Co., attrition of skilled doctors, cost escalation leading to higher material costs and increased competition from online players, the brokerage said.
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Apollo Hospitals' stock rose as much as 3.35% during the day to Rs 5,959.35 apiece on the NSE. It was trading 1.36% higher at Rs 5,845 per share, compared to a 0.19% advance in the benchmark Nifty 50 at 3:30 p.m.
The share price has risen 24.8% in the last 12 months. The relative strength index was at 37.
Twenty-four out of the 27 analysts tracking the company have a 'buy' rating on the stock, one recommends 'hold' and two suggest a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 19%.
