Hold Apollo Hospitals Enterprise; target of Rs 5000: ICICI Securities

ICICI Securities' research report on Apollo Hospitals Enterprise

Contraction in margins of new hospitals (dip of 148bps QoQ) and losses of 24/7 division (INR 1.75bn) depressed Apollo Hospitals’ EBITDA in Q1FY24. It has reduced the discounts offered on online 24/7 platform to ~14% from 17-18% in Q4FY23 leading to 8% dip in losses QoQ (up 24% YoY) and this division may be EBITDA breakeven by Q4FY24. Pharmacy business is likely to record revenue of INR 10bn in FY24E driven by higher revenue to GMV conversion in 24/7 and addition of 500-600 offline stores. It is on track to add 2,000 hospital beds (INR 15mn capex per bed) in the next 3-4 years while occupancy may be lower than 70% in the near term.

Outlook

We cut our EBITDA estimates for FY24/E25E by 3%/2% to factor in lower margins in Q1. We lower our rating to HOLD (Add earlier) but maintain target price of INR 5,000.