Target: ₹5,600

CMP: ₹4,323.20

Apollo Hospitals (APHS) has delivered a phenomenal performance (3.6x earnings) over the past five years, reporting a 24 per cent EBITDA CAGR and reducing net debt by half, benefiting from a lower tax rate.

Interestingly, over FY23-25, the outlook on operational parameters for healthcare services also remains promising (17 per cent EBITDA CAGR) on the back of superior execution of APHS and favorable macro factors.

APHS has good scope to optimize the payer mix/case mix toward insurance-linked patients (currently 45 per cent of healthcare sales) and international patients (currently 6 per cent of healthcare sales) to improve average revenue per operating bed (ARPOB).

Even occupancy at 64 per cent at the end of H1-FY23 is lower than the historical high of 71 per cent. Further capital expenditure is planned to add 2,000 beds over the next five years, increasing the number of patients under treatment.

We expect a 13 per cent/17 per cent revenue/EBITDA CAGR over FY23-25 ​​for APHS.

The pharmacy outlook is encouraging, too, with the aggressive expansion of offline/online infrastructure and the ability of APHS to provide the entire spectrum of healthcare services to its customers. As part of its aggressive store expansion plan, APHS added 473 stores in H1-FY23 as against 411 stores in FY22, taking the total to 5,002.

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