Apollo Hospitals and Enterprises (APHS) delivered a lower-than-expected 4QFY23 performance, dragged down by higher spending on Apollo 24/7 and additional establishment costs for the pharmacy business. The healthcare services business posted healthy revenue/EBITDA growth of 13%/18% YoY to INR87b/INR21b in FY23. We cut our FY24/FY25 EPS estimates by 7% each to factor in higher opex for the pharmacy business, a gradual uptick in occupancy, and higher spending on the diagnostic business.
OutlookWe value APHS on the SoTP basis (22x 12M forward EV/EBITDA for healthcare services, 12x 12M forward EV/EBITDA for backend pharmacy, 25x 12M forward EV/EBITDA for AHLL, 20x 12M forward EV/EBITDA for front end pharmacy and 2x 12M forward EV/sales for Apollo 24/7) to arrive at a TP of INR5,450.
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