Q1FY18 result highlights
Key positives: continued SAP momentum
Key negatives: Lower margins in existing hospitals; higher losses in Navi Mumbai hospital; impact to stent price control, loss in Calcutta hospital
Impact on financials: We have reduced FY18E/19E EBITDA by 6.9%/ 6.3% and FY18E/19E earnings by 25.9% / 25.8%
Valuations & view
With its leadership position, national footprint and an increasingly aggressive growth strategy reflected in its stepped-up M&A activity and organic growth investments, Apollo is one of the stronger EM healthcare models. Apollo is nearing the end of an aggressive expansion phase (2430 beds commissioned across 13 new hospitals in last 36months), which has created a strong growth platform. However it will put pressure on EBITDA growth / margins for some time. Sharp slowdown in Apollo's growth trajectory over the past few quarters (3% yoy decline in mature hospitals EBITDA in FY17 post only +6% yoy growth in FY16) adds to the challenges. Additionally, the prolonged slowdown in the key Chennai cluster is now becoming a concern. Given the softness in near-term earnings and fair valuations (~20x FY18E EBITDA), upsides would be capped. Maintain Neutral with a SOTP based price target of Rs1282.
Apollo Hospitals Enterprise is a hospital group based in India. Co. offers diagnostic facilities (MRI, CT scanners) and specialist departments that can support major operations. Co. operates a 465 bed multi-speciality hospital, a 200 bed cancer hospital, a diagonostic centre at Chennai, and a 75 bed cancer hospital at Hyderabad. Co. provides services such as managed hospitals, Apollo Health and Lifestyle Clinics, pharmacy operations, managed care and family health plans. Co. maintains a presence in Sri Lanka, Bangladesh, the U.A.E., Nepal, Ghana, Nigeria, the U.K. and the Kingdom of Saudi Arabia.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.