Healthcare services major Apollo Hospitals Enterprises is due to release its October-December numbers on February 10, with analysts projecting strong net profit and revenue growth. Better occupancy and improved average revenue per occupied bed (ARPOBs) are factors that will aid the company's earnings growth, despite the weak seasonality of Q3 for hospital majors.
The October-December period is usually a weak quarter for hospitals as patient volumes remain low on account of the festive season, year-end holidays, and harsh weather conditions in Northern India, where patients refrain from getting tested.
According to a Moneycontrol poll of five brokerages, Apollo Hospitals' net profit is likely to surge 41.5 percent to Rs 347 crore, up from the Rs 245.30 crore that it posted in the same period last fiscal. Total revenue is estimated to clock in 15 percent growth to Rs 5,575 crore in Q3 as compared to Rs 4850.60 crore that was reported in the corresponding quarter last year.
In additional, operational performance is also expected to improve, thanks to better hospital metrics and reduced losses in the company's cash guzzling digital pharmacy business. Analysts polled by Moneycontrol expect Apollo Hospitals to deliver an EBITDA margin of 13.8 percent, reflecting a decent improvement from the 12.7 percent that was clocked in the base period.
Analysts' growth projection for Apollo Hospitals are bound in a tight range, meaning any deviation from these expectations can illicit a sharp reaction in the stock.
What factors are impacting the earnings?
Aligned with the management's aim to increase occupancy and ARPOBs for Apollo's flagship hospitals business, progress on the two key metrics are likely to be the growth drivers for the company in Q3.
Improved occupancy: Analysts at BNP Paribas expect Apollo Hospitals' occupancy rate to expand 150 basis points on year 68 percent in the December quarter. The management had previously shared its aim to take occupancy levels to 70 percent for FY25.
Higher ARPOBs: Increased average revenue per occupied bed is expected to drive margin expansion as well as revenue growth for the healthcare services major. Nuvama Institutional Equities expects ARPOBs to rise to Rs 58,059, up 3 percent on year, driven by improved patient mix.
Reduced Apollo HealthCo losses: Most brokerages expect Apollo HealthCo to continue its high revenue growth trajectory with mid-teen increase in topline. In addition, reduced cash spend in Apollo 24/7, which is a part of Apollo HealthCo, would further aid consolidated earnings growth for the company. Nuvama expects pharmacy margins to expand 33 basis points in Q3 as spends at Apollo 24.7 remain stable at Rs 130 crore.
What to look out for in the quarterly show?
Analysts will closely monitor the management's guidance on Q4 occupancy rates and overall FY25 projections, along with the company's outlook on ARPOB growth. Additionally, updates on bed expansion progress and the profitability turnaround of new beds will be key focus areas.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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