Motilal Oswal has maintained its ‘Buy’ rating on Apollo Hospitals. The brokerage house kept the target price on the stock at Rs 9,015, suggesting the stock may move up over 32% in the next 12 months. The hospital company continues to build comprehensive healthcare services through hospitals, pharmacies (offline/online), diagnostics, and speciality clinics.
The company’s AHLL segment is transitioning into a diagnostics-led growth platform, with speciality and day-care integration expected to drive sustained high-teen revenue growth and mid-teen EBITDA margins beyond FY27.
Implementing efforts to expand
The brokerage is positive on Apollo Hospitals, expecting a 14%, 17%, and 24% CAGR in revenue, EBITDA, and net profit over FY25-28. While Apollo Hospitals remained the largest healthcare service provider on a national level, it is implementing efforts to expand across the focus areas of super-speciality hospitals and improve the revenue and operating profit prospects of the Health company.
Day care aiding treatment of higher number of patients
The day care services for local patients across certain indications are enabling the company to reduce ALOS (Average Length of Stay) and treat a higher number of patients. Compared to a 13-14% oncology share in the case mix three years ago, the hospital’s efforts have increased it to 17% currently. Likewise, management indicated an enhanced focus on CNS indications.
Strengthening via CONGO strategy
Apollo Hospitals’ objective is to further increase the share of CONGO (cardiology, oncology, neuroscience, gastro, orthopaedics) to drive profitable revenue growth in the hospital segment. Over the last three years, the company has onboarded 180 doctors across new and existing hospitals, strengthening speciality depth and supporting complex case additions.
Headwinds that may strike expansion plans
Overall, Motilal Oswal is confident in the stock’s expansion plan, but a few risks are in the way. The company’s management indicated temporary headwinds in the Eastern cluster due to the transfer of a doctor team from the Bhubaneshwar hospital. Apollo Hospitals has since revived team strength and, accordingly, expects performance to improve going forward.
Further, in the North cluster, growth remains constrained by bed capacity. The hospital chain is in the process of resolving this through greenfield expansions in Gurgaon, Lucknow, and Varanasi.
Apollo Hospitals is yet to report its quarterly results for the third quarter of the current financial year.
Apollo Hospital share performance
The share price of Apollo Hospitals has fallen 6% in the past five trading sessions. The stock has declined 3% in the past one month and 5.8% in the last six months. The hospital stock has little changed over the previous one year.