Apollo Hospitals hits 52-wk high on talks to raise $200 mn; up 8% in 2 days

Apollo Hospitals is looking to sell around 5-6 per cent stake in Apollo HealthCo at an expected enterprise value of $2.5-$3 billion, said a report by The Economic Times

Shares of Apollo Hospitals Enterprises (APHS) rose 4 per cent to hit a 52-week high of Rs 5,000.90 on the BSE in Friday’s intra-day trade after reports said that the hospital chain is looking to raise around $200 million this fiscal by selling stake in its healthcare platform, Apollo HealthCo. 

With today's gain, the stock surpassed its previous high of Rs 4,900, touched on December 5, 2022.

APHS is looking to sell around 5-6 per cent stake in Apollo HealthCo at an expected enterprise value of $2.5-$3 billion, said a report by The Economic Times. 

In the past two trading days, the stock has rallied 8 per cent after it reported a 60 per cent year-on-year (YoY) growth in consolidated profit after tax at Rs 145 crore in March quarter (Q4FY23). The company had posted PAT of Rs 90 crore in a year ago quarter (Q4FY22). On quarter-on-quarter (QoQ) basis, PAT was down by 5.9 per cent.

Consolidated revenue grew 21 per cent year-on-year (YoY) at Rs 4,302 crore. On sequential basis, revenues grew 0.9 per cent, mainly supported by hospitals as well as pharmacy business. earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 3.4 per cent QoQ to Rs 488 crore. EBITDA margins declined 51 bps to 11.3 per cent due to higher employee expenses.

The management guided for strong revenue growth in FY24 across segments with 15 per cent growth in hospital segment, offline pharmacy growth of 19-20 per cent and doubling of diagnostic revenues over the next 3 years.

The hospitals business continues to see improved profitability with optimum case mix and payor mix. The company has embarked upon new capex plan to add 2000 beds with over Rs 3000 crore in the next 4 years in key metros. Growth in pharmacy business was also decent but the expenses related to Apollo 24x7 are expected will continue to hit the P&L for few more quarters. Structurally, cost reduction drives, expanding of complex procedures and profitability of new hospitals remain key management focus areas, analysts at ICICI Securities said.

The brokerage maintains BUY rating on the stock due to a pick-up in elective surgeries and margins at hospitals to improve through better operating leverage, optimisation of payer and case mix, improved performances at HealthCo to be backed by improved GMV and stores addition and expected improvement in Apollo Health and Lifestyle (AHLL) segment based on better traction in all subsegments post Covid.

Analysts at Prabhudas Lilladher believes APHS has created a solid growth platform across segments and digital foraying has further made it a strong omni channel play. The company also has good presence in offline format, making it more of a formidable player than just pure play online company. Though the stake sale in Apollo HealthCo has been delayed, scale up in the business is on track, the brokerage said in a result update.