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 Rs9.4bn (up 15% YoY), was largely 7in line with our estimates. Adjusted for 24x7 losses and ESOPs cost (~Rs1.26bn), EBITDA was Rs10.7bn, up 12% YoY. The stake sale in HealthCo to Advent and merger with Keimed are positive moves toward an integrated pharmacy and digital health platform, with Apollo HealthCo scaling up well and its digital business on track for EBITDA breakeven in the next 2–3 quarters. The management guidance of Rs17.5bn EBITDA of the merged entity by FY27 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, highgrowth platform in the pharmacy and digital healthcare space, which is more consumer centric in nature. Overall, we estimate 26% EBITDA CAGR over FY25- 28E.

Outlook

We maintain ‘BUY’ rating with TP of Rs9.300/share. We ascribe 30x EV/EBITDA multiple to hospital and offline pharmacy and assign 1x sales to the 24/7.