Apollo Hospitals Receives Target Price Upgrade As Citi Sees Near-Term Concerns Priced In
Calling the stock’s risk-reward attractive, Citi notes that Apollo has underperformed peers over the last one to two years and now trades at a discount to key listed players.
Global brokerage firm Citi has reiterated Apollo Hospitals Enterprise Ltd. as a high-conviction buy, arguing that the recent stock correction has turned valuations attractive. The brokerage notes that Apollo's share price has already more than factored in near-term losses from new hospitals and the temporary disruption in patient inflows from Bangladesh.
The brokerage projects consolidated Ebitda CAGR of 23% over FY25–28E and maintains its 'buy' call, raising the target price to Rs 9,600 from Rs 9,330 earlier, indicating a 35.5% potential upside.
Citi acknowledges that losses of around Rs 200 crore over FY26–27 from newly commissioned hospitals could keep hospital Ebitda margins broadly flattish at 24% in the near term. However, as these facilities ramp up, the brokerage expects over 100 bps margin expansion in FY28.
It also highlights that Apollo’s HealthCo segment is shifting from being a drag to becoming a value creator as offline pharmacies scale up, losses in Apollo 24x7 narrow, and the Keimed merger and eventual listing unlock a large high-growth consumer platform.
On the core hospital business, Citi sees strong earnings visibility. Apollo is delivering mid-teens revenue growth, backed by expansion in Tier-1 cities, steady occupancies, and rising average revenue per occupied beds driven by a richer case mix. The disruption in Bangladesh patient inflow is already reflected in the base, and management expects the second half of the year to be stronger than the first half.
Citi says the HealthCo and pharmacy businesses are moving from drag to value creation. Losses have narrowed with offline and online pharmacy operations turning Ebitda-positive in FY25, and Apollo 24x7 expected to break even by end-FY26.
The HealthCo–Keimed merger and subsequent listing by FY27 are expected to create a scaled, integrated pharmacy distribution and digital platform. Citi forecasts Ebitda from the combined entity to grow at over 50% CAGR over FY25–28, with margins rising from 3.3% currently to 7% by FY28, driven by 24x7 breakeven, higher private-label contribution, operating leverage in the pharmacy network, and supply-chain synergies with Keimed.
Calling the stock’s risk-reward attractive, Citi notes that Apollo has underperformed peers over the last one to two years and now trades at a discount to key listed players as well as below its own historical valuation band. Concerns around Bangladesh patient disruption and losses from new hospitals have contributed to this underperformance, but Citi believes these are already priced in.
