Buy Apollo Hospitals Enterprise; target of Rs 9300: Prabhudas Lilladher

Prabhudas Lilladher's research report on Apollo Hospitals Enterprise

Apollo Hospitals Enterprise (APHS) reported consolidated EBITDA of Rs8.5bn (up 26% YoY), was 6% above our estimates. Adjusted for 24x7 losses and ESOPs cost (~Rs1.2bn), EBITDA was Rs9.7bn, up 18% YoY. The recent stake sale in HealthCo to Advent and merger with Keimed are a positive step and will lead to an integrated pharmacy distribution business complemented by the fastgrowing omni-channel digital health business. Scale-up in Apollo HealthCo has been on track with likely breakeven in EBITDA of digital business over the next 3-4 quarters. The management guidance of Rs20bn EBITDA of the merged entity by FY28 provides comfort. Further, mgmt. has also announced the demerger of its Omnichannel Pharmacy business, 24*7, and telehealth business into a newly listed entity (NewCo) with an aim to unlock value by creating a focused, high-growth platform in the pharmacy and digital healthcare space, which is more consumer centric in nature.

Outlook

Overall, we estimate 27% EBITDA CAGR over FY25-27E. We maintain ‘BUY’ rating with revised TP of Rs9.300/share. We ascribe 30x EV/EBITDA multiple to hospital and offline pharmacy and assign 1x sales to the 24/7.