Apollo Hospitals is on track to achieve cash Ebitda breakeven (excluding ESOP cost) in Healthco by Q2 FY26/Q3 FY26. Management sees gross merchandise value growth of 25-30% YoY in FY26. Apollo Hospitals indicated the sales: GMV ratio to be 40-45% in FY26 (37% in FY25).
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Motilal Oswal Report
Apollo Hospitals Enterprises Ltd. posted marginally better-than-expected revenue (4% beat), while Ebitda was in line for the quarter. The lower tax rate led to better-than-expected earnings for the quarter.
While operating beds inched up for FY25, Apollo Hosptials delivered healthy revenue growth in healthcare services (10%/13% YoY for Q4 FY25/FY25), driven by improved case mix and occupancy. Further, the addition of beds is on track (870 beds in FY26; 10% YoY increase).
The cash loss in the digital segment of Healthco has reduced from Rs 1.1 billion in Q4 FY24 to Rs 798 million in Q4 FY25 and is expected to break even in Q2/Q3 FY26.
Primary care within the Apollo Health and Lifestyle Ltd. segment saw a sharp improvement in margins QoQ led by superior execution, while diagnostics witnessed a moderation in margins due to the ongoing strategic reset in the business.
We broadly retain our estimates for FY26/FY27. We value Apollo Hospital on an SoTP basis (30x EV/Ebitda for the hospital business, 15x EV/Ebitda for retained pharmacy, 23x EV/Ebitda for Apollo Health and Lifestyle, 22x EV/Ebitda for front-end pharmacy, and 2x EV/sales for Apollo 24/7) to arrive at our target price of Rs 8,050.
We expect a 15%/17%/23% CAGR in revenue/Ebitda/PAT over FY25-27. This would mainly be driven by-
the addition of beds in the healthcare services segment coupled with improvement in productivity at existing facilities,
reduction in losses at the healthco level, and
revival in revenue growth/profitability in the diagnostic segment. Reiterate Buy.
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