Edelweiss’ research report on Apollo Hospitals EnterpriseApollo Hospitals’ (APHS) Q2FY16 consolidated revenue/EBITDA/PAT grew 18%/10%/24% YoY. Healthcare Services revenue grew 8% YoY (excluding new hospitals: 5%) as some of the clusters witnessed heightened competitive intensity and Stand-alone Pharmacy (SAP) revenue grew 33% YoY. While EBITDA margin for SAP improved ~40bps YoY to 3.7%. Healthcare Services’ margin was largely stable at ~22%. APHS reiterated its commitment to the new formats (AHLL initiatives) and digital interface with patients. We believe, though in the near term margins will remain subdued because of investments, the long-term growth story remains intact. Maintain ‘BUY’ with target price of INR1,360Outlook and valuations Profitability could be under pressure in the near term because of large addition of beds. However, the long-term growth story remains intact. Our target price is INR1,360, based on 20x FY17E EBITDA. We maintain ‘BUY/SO’.
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