Apollo Hospitals Enterprise's Q3FY20 results (Outperformer) - Another strong quarter; all segments deliver
Q3FY20 result highlights
- Consol revs grew 17% yoy to Rs29.1bn – above est of Rs28.2bn. Existing hospitals grew 9% vs est of 10% and new hospitals grew 16% yoy vs est of 11%. SAP revs grew +22% yoy to Rs12.3bn vs est of 17%
- Consol EBITDA (pre Ind AS 116) were above est at Rs3.6bn (+28% yoy); Q2 was Rs3.4bn. EBITDAM – 12.2% vs 11.1% last year (est – 11.9%); Standalone adj. EBITDA was Rs3.2bn above est of Rs3.1bn
- Mature hospital EBITDA came at Rs2.4bn inline with est; 12% growth yoy; 22.1% margins – up +60bps yoy; New hospital EBITDA was Rs341m above est of Rs298m
- SAP EBITDA came at Rs751m – above est of Rs704m (Rs708m in Q2); 6.1% margins (+10bps qoq) vs 6% est; Highest ever EBITDA. AHLL EBITDA stood at Rs56m EBITDA vs est of Rs30m
- Consol adj PAT - Rs1.1bn; Standalone adj PAT Rs1.1m vs est of Rs1bn
- Guidance – Further margin improvement in both existing / new hospitals; AHLL- 12-15% EBITDAM over next 24 months; steady 18-20% rev growth in SAP with EBITDA margin improvement; Net debt reduction to ~Rs26b by FY20 end (Rs32bn – FY19) driven by recent corporate actions and FCF from thereon; Reduction in pledged shares to ~30% of promoter sharing holding been achieved.
Impact on financials: Increase EBITDA estimates by 6/6% in FY20/21E and introduce FY22 estimates
Valuations & view
With its leadership position, national footprint and a multi-pronged healthcare delivery model, Apollo is a strong EM healthcare model. Apollo’s recently concluded big ticket expansion has created a strong growth platform. Post a weak earnings phase over FY15-18, strong earnings recovery is visible from FY19 onwards. Led by sharp improvement in Navi Mumbai unit, the new hospital cluster has begun to contribute positively and the existing hospital profitability has also started to inch up steadily. While the Standalone Pharmacy (SAP) business will sustain its 20%+ EBITDA growth, sharp turnaround AHLL will further aid consolidated profitability growth. We estimate EBITDA growth to bouncing back to 19% CAGR over FY19-22E. Mgt guidance indicates potential for upsides to our estimates. Maintain Outperformer with a SOTP price target of Rs2034. One of our top picks in healthcare services space.
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.
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