Target: ₹6,978

CMP: ₹6,615.80

In Q3-FY24, Apollo Hospitals Enterprise Limited (APHS) reported a good set of performance which outperformed our expectations on all fronts. Revenue for the quarter grew by 13.8 per cent y-o-y and flat sequentially to ₹4,850 crore. EBITDA grew by 21.4 per cent y-o-y however down by 2.2 per cent q-o-q to ₹613 crore. The EBITDA margin expanded by 80 bps y-o-y and contracted sequentially by 29 bps to 12.7 per cent. The ARPOB saw a double-digit growth despite seasonal tailwinds and Chennai cyclones. ARPOB stood at ₹56,328 per day, up 10 per cent y-o-y.

Overall hospital occupancy increased to 65 per cent, compared to 64 per cent in the same period the previous year, supported by a robust increase in patient flows.

The positive outlook on AHEL is upheld based on several factors, including an aggressive store expansion plan, a comprehensive presence in the healthcare delivery chain, ongoing cost optimisation measures, and an increase in occupancy levels. However, adjustments to margin expectations have been made, considering a longer-than-expected timeline for the improvement in operations for healthcare and diagnostic centers.

The stock is valued through a SOTP analysis, resulting in a price target of ₹6,978. The rating is maintained at ADD.