Apollo Hospitals bets on specialty, HealthCo growth; 'Buy' retained: MOFSL

Apollo Hospitals is gearing up for its next growth phase, driven by a higher-complexity case mix in hospitals, expansion of its HealthCo platform, and integration of diagnostics and specialty services, according to management interactions with Motilal Oswal Financial Services Limited (MOFSL). Analysts remain positive on the company, projecting strong revenue and profit growth over FY25-28.

 

The hospital business, which contributes nearly 50 per cent of revenue and over 80 per cent of Ebitda, remains the core growth engine for Apollo Hospitals. In H1FY26, the segment reported 10 per cent year-on-year (Y-o-Y) revenue growth, supported by a 24.6 per cent Ebitda margin. Management is focusing on optimising the case mix and average length of stay (ALOS) to improve profitability. Day-care services for local patients are enabling quicker turnover, while the share of oncology cases has increased from 13-14 per cent three years ago to 17 per cent currently. There is also an enhanced focus on cardiology, neuroscience, gastroenterology, and orthopedics (CONGO), aimed at driving profitable growth.

 

Over the last three years, Apollo Hospitals has recruited around 180 doctors across new and existing hospitals to strengthen specialty depth and support complex case handling. Temporary headwinds in the Eastern cluster due to a doctor team transfer at Bhubaneshwar have been resolved, and performance is expected to improve. In the North cluster, growth is constrained by bed capacity, which Apollo Hospitals plans to address through greenfield expansions in Gurgaon, Lucknow, and Varanasi. Overall, the company plans to add 3,660 beds over the next five years, with a total project cost of ~₹8,300 crore, of which ₹5,800 crore remains to be spent. Management expects the hospital business to deliver 10-15 per cent Y-o-Y Ebitda growth by FY27, with operating losses from new hospitals estimated at ₹50 crore/₹150 crore in H2FY26/FY27.  ALSO READ | Brokerages slash United Spirits' target price, earnings estimates after Q3 

The HealthCo segment, which contributes 42 per cent of revenue but just 11 per cent of Ebitda, is emerging as the fastest-growing segment. Apollo Hospitals is transitioning HealthCo from a pharmacy-dominated model to a multi-vertical healthcare services platform. Initiatives include condition-management programs for chronic illnesses, preventive health check-ups, and expansion of home-care and doctor-led outreach services. Currently, ~65 per cent of HealthCo revenue comes from pharmaceuticals, with the remainder from consulting and outpatient services. Management is diversifying revenue through monetisation of consulting services, OPD offerings, and insurance commissions.

 

Apollo Hospitals expects 15 per cent Y-o-Y gross merchandise value (GMV) growth in HealthCo, driven by pharmacy segment expansion and new offerings. On the offline pharmacy side, the company plans to add 400-500 stores and improve revenue per store. Online pharmacy operations are on track to achieve Ebitda break-even by Q4FY26. For FY27, the offline pharmacy business is projected to grow 18-20 per cent Y-o-Y, with contributions from the online business further boosting Ebitda.

 

The AHLL segment, which accounts for 7.5 per cent of consolidated revenue, is evolving into a diagnostics-led growth engine. It delivered 18 per cent Y-o-Y revenue growth in 1HFY26, with Ebitda margins rising to ~10 per cent. Apollo Hospitals plans to expand diagnostics through three reference labs and additional collection centers over the next 12-18 months. Integrating day-surgery centers with hospitals is expected to increase specialty care Ebitda margins from 11 per cent to ~20 per cent. The company recently received Competition Commission of India approval to acquire a 30.58 per cent stake in AHLL from International Finance Corporation entities for ₹1,250 crore.  ALSO READ | Bank of India surges 7%, hits 8-year high on heavy volumes; here's why 

Motilal Oswal values Apollo Hospitals on a sum-of-the-parts basis, applying EV/Ebitda multiples of 30x for hospitals, 20x for retained pharmacy, 23x for AHLL, 25x for front-end pharmacy, and 2x EV/sales for Apollo 24/7, resulting in a target price of ₹9,015. Analysts reiterated a 'Buy' rating on Apollo Hospitals Enterprises stock, citing company's' national scale, specialty hospital focus, and potential for HealthCo revenue and Ebitda expansion.

 

Apollo Hospitals continues to strengthen its integrated healthcare ecosystem, combining hospitals, offline and online pharmacies, diagnostics, and specialty clinics, positioning itself for sustained high-teens revenue and mid-teens Ebitda growth in the medium term.

 

 

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