Buy Apollo Hospitals; target of Rs 7280: Motilal Oswal

Motilal Oswal's research report on Apollo Hospitals

Apollo Hospitals Enterprises (AHEL) has proposed to infuse equity capital(INR24.8b) from Advent international at Apollo healthco level (AHL) andintegrate Keimed private ltd (distribution arm of Apollo group) with AHL.The deal values AHL at INR145b (USD1.8b) at an expected valuation ofEV/sales of 1.9x. Keimed is valued at INR80b (23x FY24E EBITDA of INR3.5b).The deal establishes a strong pharmacy franchise that spans the entirevalue chain from distribution to direct and online customer engagement.This expansion not only increases scale but also boosts efficiencythroughout the value chain, leading to enhanced profitability.

Outlook

We value AHEL on an SOTP basis (26x EV/EBITDA for hospitals, 12x EV/EBITDA for retained pharmacy, 20x EV/EBITDA for front-end pharmacy, 25x EV/EBITDA for AHLL, and 2x EV/sales for Apollo 24/7) to arrive at a PT of INR7,280. Maintain BUY.