Why Is Apollo Hospitals Stock Poised For Re-Rating? Read PL Capital Report

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PL Capital Report

Apollo Hospitals Enterprise Ltd.’s stock has underperformed since FY24 versus its peers (Max Healthcare, KIMS, Fortis). We believe underperformance was due to relatively moderate growth in the Hospitals segment, elevated losses from Apollo 24×7 business and stake sale of Apollo HealthCo to Advent in April 2024 at below market expectations. As part of the ongoing process, these concerns are addressed via 3,577 bed additions over the next three-four years, reducing losses in 24×7 and likely breakeven by H1 CY26, and listing of HealthCo by FY27 end to unlock value.

Overall, we estimate 26% Ebitda CAGR over FY25-28E. At CMP, Apollo Hospital Enterprises Ltd. is trading at 22x EV/Ebitda on Sept 2027E adjusted for minority and rental.

Ascribing 27x EV/Ebitda to HealthCo, Apollo Hospital plus Diagnostics business is available at ~20x EV/Ebitda on Sept 2027E, which is at 15-30% discount to peers.

We ascribe 27x EV/Ebitda multiple to Hospitals and HealthCo based on Sept 2027E. We recommend ‘Buy’ rating with target price of Rs 9,300/share.

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