ICICI Direct is bullish on Apollo Hospitals has recommended buy rating on the stock with a target price of Rs 1400 in its research report dated February 11, 2019.
ICICI Direct's research report on Apollo Hospitals
The Q3FY19 standalone operational performance was in line with I-direct estimates while net profit was lower mainly due to higher-than-expected interest cost and depreciation Revenues grew 14.4% YoY to Rs 2169 crore (I-direct estimate: Rs 2145.8 crore) due to 13.9% growth in pharmacy to Rs 1011.9 crore (I-direct estimate: Rs 1043.2 crore) and 14.8% YoY growth in healthcare business to Rs 1157.3 crore (I-direct estimate: Rs 1102.8 crore) EBITDA margins improved 68 bps YoY to 12.3% (I-direct estimate: 12.6%) mainly due to lower other expenditure. EBITDA grew 21.1% YoY at Rs 267.9 crore (I-direct estimate: Rs 271.0 crore) Net profit grew 28.9% to Rs 86.9 crore (I-direct estimate: Rs 93.3 crore) mainly due to strong operational performance.
We value the stock on SOTP basis by valuing the healthcare business (existing hospitals & JV) at 14x FY21E EV/EBITDA, healthcare business (new hospitals and JVs) at 1.5x FY20E and pharmacy business at 1.2x FY20E EV/sales. We ascribe a target price of Rs 1400. We believe the reaction on account of additional pledging of shares by for KKR unwinding is slightly overblown.
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