Buy Apollo Hospitals; target of Rs 5580: Motilal Oswal

Motilal Oswal's research report on Apollo Hospitals

Ms. Reddy has reiterated the company’s commitment to reducing the losses in Healthco to zero by 4QFY24, thereby improving the overall profitability of APHS. APHS is making efforts to improve margins in new hospitals by optimizing the case mix and providing high-end tertiary treatment. APHS is strengthening its ‘IT’ backbone to gain a comprehensive database about patients and provide integrated healthcare services to them. We remain positive on APHS on the back of favourable demand tailwinds in the hospital segment and a robust outlook for offline/online pharmacies as well as diagnostic services. We expect a 20%/27% sales/EBITDA CAGR over FY23-25 for APHS.

Outlook

We arrive at a TP of INR5,580 by valuing APHS on the SOTP basis (EV/EBITDA of 23x for Healthcare Services, 13x for retained Pharmacy, 25x for front-end Pharmacy, and 20x for AHLL; 4x EV/sales for Apollo 24/7). Reiterate BUY.

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