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ICICI Securities
Apollo Hospitals (Buy)
CMP: ₹1,302.65
Target: ₹1,666
Apollo Hospitals Enterprise, in our view, is well positioned for a speedy recovery as normalcy returns post the lifting of the lockdown due to Covid-19.
Lower dependence on Mumbai and Delhi (most infected areas) and >40 per cent revenue being contributed by largely non-impacted pharmacy business would provide the necessary support for growth. We expect near-term impact in hospital and Apollo Hospitals businesses due to Covid-19 outbreak resulting in lower occupancy and cashflow. However, the pharmacy business would provide support.
We are positive on Apollo Hospitals’ long-term outlook considering its strong brand and pan-India presence in hospital segment, strong growth momentum, continued margin recovery with the end of expansion phase and 25.4 per cent EPS CAGR over FY20-FY22E. Reiterate ‘buy’.
Key downside risks: Higher competition in areas where Apollo Hospitals has dominant position, longer time taken for normalcy from the Covid-19 outbreak, and delay in break-even for newer hospitals.
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