Upside ahead for Apollo Hospitals on robust guidance, valuations

In the recently released results of Apollo Hospitals Enterprise (APHS) for the third quarter of financial year 2025 (Q3FY25), revenue was in line but operating profit margin was weaker. Net profit too was in line, due to higher other income. Growth and margins in the Apollo Health & Lifestyle (AHLL) businesses were in line.

 

APHS delivered strong growth in realisation per patient as well as number of patients. But there was a moderation in gross merchandise value or GMV for Apollo 24/7 and so was higher opex (operational expenditure) due to commissioning of new hospitals.

 

APHS’ Q3FY25 revenue rose 13.9 per cent year-on-year (Y-o-Y) to ₹5,530 crore. Healthcare services’ revenue grew 13 per cent Y-o-Y to ₹2,780 crore.

 

Healthco’s (offline/online pharmacy and Apollo 24/7 with contribution of 43 per cent of sales) revenue grew 15.3 per cent Y-o-Y to ₹2,350 crore.

 

AHLL revenue grew 15 per cent Y-o-Y to ₹390 crore. Operating profit grew 24.1 per cent Y-o-Y to ₹760 crore. In the first nine months of financial year 2025 (9MFY25), revenue grew 15 per cent to ₹ 16,200 crore, operating profit grew 29 per cent to ₹2,250 crore, and net profit grew 64 per cent to ₹ 1,060 crore. APHS added 330 stores on a year-to-date basis.

 

The operating profit margin in Q3FY25 for healthcare services stood at 24.1 per cent (+30 basis points Y-o-Y). The AHLL margin was 8.8 per cent (+110 basis points Y-o-Y), and the Healthco segment was 2.4 per cent (+230 basis points Y-o-Y). The overall operating profit margin expanded 110 basis points Y-o-Y to 13.8 per cent.

 

Adjusted net profit grew 51.8 per cent Y-o-Y to ₹370 crore. ARPOB (average revenue per occupied bed) grew 8 per cent Y-o-Y to ₹60,839, with occupancy of 68 per cent (up 200 basis points Y-o-Y) in Q3FY25. The GMV for Apollo 24/7 grew 11 per cent Y-o-Y to ₹760 crore in Q3FY25. Pharma Average Order Value in Q3FY25 stood at ₹1,001. 

 

In the hospitals segment (with contribution of 50 per cent of sales), operating profit grew 14 per cent Y-o-Y to ₹670 crore. Operating profit margin improved 30 basis points Y-o-Y to 24.1 per cent. The volume of patients treated grew 5 per cent Y-o-Y. Occupancy rose to 68 per cent vs 66 per cent in Q2FY24.

 

In Healthco, operating profit was ₹56.6 crore (₹52.1 crore in Q2FY25). Platform GMV grew 11 per cent Y-o-Y to ₹760 crore (stable Q-o-Q). Net new 132 stores opened in the quarter, taking total store count to 6,360.

 

In AHLL (contribution 7 per cent of sales), revenue grew 15 per cent to ₹390 crore and operating profit grew by 32 per cent Y-o-Y to ₹34.2 crore. Revenue of primary care grew 17 per cent Y-o-Y to ₹ 110 crore. Revenue of specialty care rose 13 per cent Y-o-Y to ₹170 crore.

 

All regulatory approvals are in place for insurance products through Apollo 24/7. Three life insurance and three health insurance companies would be on-boarded soon, and the same would reflect from Q4FY25. APHS is working on a recalibrated cost structure for Apollo 24/7 and ₹900-1,000 crore quarterly GMV would enable operating profit break-even in Apollo 24/7.

 

Apollo plans to add 3,512 beds over four years across 11 locations in India with a capex outlay of ₹ 6,100 crore (of which ₹1,800 crore has been incurred). About 50 per cent of bed expansion will be commercialised in FY26. Pune, Kolkata, and Delhi would start in H1FY26, followed by Gurgaon and Hyderabad in H2FY26. Expect Kolkata and Delhi to have an operating profit break-even within 12 months.

 

APHS expects 15-18 per cent growth in AHLL, driven by diagnostic growth with 200 basis points operating profit margin expansion annually. APHS guides for occupancy levels to rise to 72-73 per cent in FY26 and FY27 and anticipates 6-7 per cent ARPOB growth.

 

International (excluding Bangladesh) revenue grew 19 per cent Y-o-Y. The impact of revenue loss from Bangladesh was 1.5 per cent. APHS, however, expects patients from the Middle East, Africa, Indonesia, and Iraq. Moderation in CGHS patient flow in Ahmedabad may be offset by better execution at the Navi Mumbai Hospital.

 

The stock has corrected from ₹7,436 in early January to ₹6,377. Given promising results and good guidance, there could be an upside, according to many analysts.