Shares of multispecialty healthcare firm Apollo Hospitals Enterprise have given multi-bagger returns in calendar year 2021 so far, outperforming the benchmark indices as well as the broader markets.
The stock gained 107 percent year-to-date in 2021 against the BSE Sensex and Midcap indices that gained 22 percent and 36 percent, respectively.
Moreover, the return from its March lows was phenomenal as it shot up 376 percent from the March 2020 lows. In the same period, the BSE Sensex surged 127 percent and BSE Midcap gained 156 percent.
The strong operational performance reported by the company in the last few quarters, and the government's major focus on health infrastructure boosted investor sentiments.
"Apollo Hospitals Enterprise has gained over 100 percent of its market value on the NSE in calendar year 2021, so far ahead of the sequential growth of the hospital business and increasing the average revenue per operating bed (ARPOB). The June quarter number and expectations of strong growth in FY22 in the hospitals business also boosted investor sentiment," said Akhilesh Jat, Pharma Analyst, CapitalVia Global Research.
Santosh Meena, Head of Research, Swastika Investmart, also said Apollo Hospitals has gained more than 100 percent this year on the back of better-than-expected results in the last two quarters while the government's initiatives to support health infrastructure also boosted the sentiment for this stock.
"There was some margin pressure in the last quarter but it is likely to improve from here. The overall outlook is still bullish. It may continue to trade on premium valuations because of its strong brand name and pan-India presence," he added.
Earnings
Apollo Hospitals is operating the largest health ecosystem, with over 70 hospitals and over 4,100 pharmacy outlets in India. The company has delivered strong operational performance in the past one year across segments.
Apollo Hospitals reported a healthy consolidated profit at Rs 500.68 crore for the quarter ending June 2021, against a profit of Rs 169.89 crore in the March 2021 quarter and a loss of Rs 226.24 crore in the June 2020 quarter. Revenue in the same period increased to Rs 3,760.21 crore from Rs 2,867.95 crore and Rs 2,171.50 crore, respectively.
At the operating level, earnings before interest, tax, depreciation and amortisation (EBITDA) increased to Rs 519.87 crore in the June 2021 quarter, from Rs 411.83 crore in the March 2021 quarter and Rs 35.48 crore in the June 2020 quarter. EBITDA margin declined to 13.82 percent in Q1FY22 from 14.35 percent in Q4FY21, but increased sharply from 1.63 percent in Q1FY21 on a low base.
Fortis Healthcare and Max Healthcare also reported the good quarterly numbers and are trading near their all-time high levels.
"In the first quarter of FY22, Apollo Hospitals Enterprises reported a strong 31 percent quarter-on-quarter (QoQ) growth in consolidated revenue at Rs 3,760 crore. In the first quarter of FY22, Max Healthcare reported its highest network operating EBITDA of Rs 360 crore. Fortis Healthcare posted a profit after tax (PAT) of Rs 430.6 crore in first quarter of FY22 against a loss of Rs 187.9 crore in the first quarter of FY21," said Akhilesh Jat.
Technically, the stock looks expensive at the current levels but considering the momentum, it can rally up to 10 percent in the near term before correction and consolidation, experts feel.
"It is moving in an upsloping channel formation, where the upper trendline comes around the Rs 5,200-5,300 zone. So it has some more room left before it corrects. On the downside, the Rs 4,800-4,700 area is an immediate demand zone. Below this, it may head towards the Rs 4,200 level and that will be a good entry level," said Meena of Swastika Investmart.
Akhilesh Jat, pharma analyst, CapitalVia Global Research, said the stock has been consistently maintaining its uptrend and trading in a rising channel on broader charts.
"Technically, we can expect the target price near Rs 5,350-5,460, which is the upper resistance zone of the rising channel. Additionally, the stock has also formed a pole and flag pattern on the daily charts and has given a breakout above the same, with marginally higher volumes, which suggest more upside in prices," he added.
However, Sandeep Matta, founder, TRADEIT Investment Advisor, feels, technically, the counter is trading at a PE of 122 and looking expensive at the current price. "With further momentum in vaccination drive, significant reduction in COVID cases and stronger health awareness, we anticipate a correction in the counter till Rs 4,200 in the next 2-3 months, and, therefore, advise to book profits and avoid fresh entry at current valuation."
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