Buy Apollo Hospitals; target of Rs 5600: Motilal Oswal

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Motilal Oswal's research report on Apollo Hospitals

APHS has delivered a phenomenal performance (3.6x earnings) over the past five years, reporting a 24% EBITDA CAGR and reducing net debt by half, benefiting from a lower tax rate. Accordingly, the stock price has appreciated 3.6x in the same period. Interestingly, over FY23-25E, the outlook on operational parameters for healthcare services also remains promising (17% EBITDA CAGR) on the back of superior execution of APHS and favorable macro factors. The pharmacy outlook is encouraging, too, with the aggressive expansion of offline/online infrastructure and the ability of APHS to provide the entire spectrum of healthcare services to its customers.

Outlook

We have a BUY rating on APHS with a price target of INR5,600 valued on the SOTP basis (23x EV/EBITDA for hospital business, 16x EV/EBITDA for back-end pharmacy, 22x EV/EBITDA for front-end pharmacy, 30x EV/EBITDA for Apollo Health and Lifestyle (AHLL), and 4x EV/sales for Apollo 24/7).

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Apollo Hospitals - 17 -01-2023 - moti