Apollo Hospitals' Stock Gains As Analysts Raise Price Targets After Q1
Here's what brokerages made of Apollo Hospitals' Q1 performance.
Shares of Apollo Hospitals Ltd. gained after analysts hiked price targets on the company, citing a recovery in its core hospitals business and increasing traction for its digital platform, among others.
The Chennai-based hospital chain operator posted a 31% sequential jump in revenue at Rs 3,760.2 crore in the quarter ended June. That compares with the Rs 3,117.3-crore consensus estimate of analysts tracked by Bloomberg.
Highlights (QoQ, Consolidated)
Net profit surged 191% to Rs 489.3 crore, against the estimated Rs 165.7 crore.
Ebitda up 26% at Rs 519.9 crore, compared with the Rs 434.9-crore forecast.
Margin stood at 13.8% versus 14.4%. Analysts had pegged the metric at 14%.
The consolidated revenue of the healthcare services division increased 15% sequentially to Rs 1,482.7 crore. The company's omnichannel healthcare platform Apollo 24x7, announced in the quarter ended March, also received 1 crore registrations as of June. Apollo said it was seeing more than 20 lakh weekly active users on it.
Shares of Apollo Hospitals gained as much as 6.5% to Rs 4,329.95 apiece as of 12 p.m. on Monday. Of the 24 analysts tracking the stock, 21 have a ‘buy’ rating, and one each recommend a ‘sell’ and a ‘hold’, according to Bloomberg data. The average of 12-month consensus price targets implies a downside of 6.7%.
Here's what brokerages made of Apollo Hospitals' Q1 performance:
Morgan Stanley
Maintained 'overweight' stance, raised target price from Rs 3,602 to Rs 4,743, implying a potential upside of 17%.
Key themes for Apollo include recovery in core hospitals business, continuing momentum in pharmacies and scale up and monetisation of its nascent healthtech platform.
Travel resumption will help in core business volume recovery. Margins should improve in mature hospitals to 25% (22% in Q1) and 20% in new hospitals (16% in Q1).
Strong pharmacy supply chain, home delivery across 16,000 pincodes and online presence should build an omnichannel platform.
CLSA
Upgrades to 'outperform' from 'sell', raises target price to Rs 4,420 from Rs 2,900, implying a potential upside of 9%.
Strong quarter for pharmacy and new hospital occupancy at a record high
"The traction of the stake sale in Apollo Hospitals, the recent peer transaction and a rising share of private labels sees us raise out target multiples."
A big valuation surprise would be required to drive significant upside.
Ebitda and net profit were ahead of estimates, boosted by the contribution from Covid-19-linked services like vaccines and diagnostic tests.
Brownfield expansion plans for hospitals are underway and value unlocking for the healthcare technology platform, Apollo HealthCo, is expected in two months.
Kotak Institutional Equities
Maintains 'add' rating, raises target price to Rs 4,400 from Rs 3,400, implying a potential upside of 8.2%.
While traditional verticals remain on a strong footing, Apollo is also executing well on the digital front with 24/7 witnessing strong traction.
24/7 has already enhanced its brand visibility through robust marketing and with the impending fundraise in HealthCo, Apollo Hospitals can better compete with other e-health players and accelerate its digital journey.
All segments benefitted from the impact of Covid, with vaccinations, RT-PCR tests and Covid patients driving growth.
Impressed by Apollo’s execution across segments and raises FY2022-24 Ebitda estimates by 6-7% led by higher growth in pharmacy and Apollo Health & Lifestyle Ltd. business.
Jefferies
Maintains ‘buy’ rating, raises target price to Rs 4,699 from Rs 4,303, implying a potential upside of 15.7%.
Apollo reported an 18% beat on revenues and Ebitda, driven by strong Covid-related sales in hospitals as well as better-than-expected vaccination numbers.
Surprisingly average revenue per occupied bed was up sequentially, despite a higher component of Covid sales.
The company provided fresh color on 24/7 revenue targets and spending. Management expects Apollo Pharmacy to continue growing at 18-20% per annum, driven by store expansion. The company is looking for both strategic or financial investors in the Apollo HealthCo (Newco, Pharmacy+24/7).
ICICI Securities
Maintains ‘add’ rating, raises target price to Rs 4,312 from Rs 3,466, implying a potential upside of 6.2%.
Apollo Hospitals Enterprises’ Q1FY22 performance was better than estimate led by strong recovery in occupancies along with average revenue per occupied bed, stockpiling by pharmacy customers during second Covid-19 wave and incremental revenue from vaccination.
However, margins were low due to lower margins in vaccination business and costs relating to 24x7 initiative.
Remains positive on Apollo’s long-term outlook considering its strong brand and pan-India presence in the hospital segment, margin expansion potential and aggressive focus on creating digital networks for pharmacy, doctor consultation, clinics and diagnostics.