Apollo Hospitals beats estimates in Q3, as specialty care continues to drive growth

Apollo Hospitals on Tuesday beat Street estimates in the quarter ended December, led by strong demand for specialty care and double-digit growth across businesses. The hospital chain reported revenue of ₹6,477 crore, up 17% year-on-year, while profit after tax climbed 35% to ₹502 crore.

Earnings before interest, taxes, depreciation, and amortization (Ebitda) grew 27% to ₹965 crore and its margin slightly expanded to 14.90% 13.78% a year ago.

Brokerages polled by Bloomberg had estimated revenue to grow to ₹6,326.5 crore and PAT at ₹489.6 crore.

Chief executive Dr Madhu Sasidhar told Mint that the growth was boosted by the high specialty service lines, especially CONGO specialties and transplants. CONGO refers to the cardiac, oncology, neurosciences, gastroenterology and orthopaedics divisions that have now become a significant growth driver for the chain.

Growth in the December quarter, typically not seasonally strong for the hospital, is “not a one -off, but more so [due] to a very high level of intentionality from how we recruited, invested in infrastructure, and even set up our marketing, sales, and digital activities,” he said.

In the previous quarter too, the dip in seasonal infections was outweighed by growth in CONGO specialties, lifting revenue up 13% y-o-y. Revenues from CONGO specialties were up 16% during the reporting quarter, the company said in its investor presentation.

High-complexity, multi-disciplinary care will remain a focus and a growth driver for the hospital that includes CONGO segments, but also other areas such as critical, high complexity care, said Sasidhar. “So, that is an area of focus. But we also operate a large number of hospitals in different geographies and different markets, tier-II and tier-III markets where there will be a significant mix of medical and surgical CONGO and low complexity care as well.”

Notably, the growth came primarily on the back of existing beds, as incremental bed additions were operationalized late in the quarter. “In the future, there is also going to be the effect of additional beds that come up,” said Sasidhar.

In Q3, Apollo had commissioned beds in Pune; this quarter, it will commission hospitals in Hyderabad, Kolkata and Bengaluru. Apollo Hospitals had earlier announced a plan to add over 3,500 beds over the next five years, with an investment of ₹5,400 crore.

Business-wise earnings

Apollo's hospitals services business saw a 14% growth in revenue to ₹3,183 crore, while its PAT was ₹422 crore, up 21%.

Apollo Health and Lifestyle Ltd, its retail and diagnostics arm, saw its revenue rise 20%, primarily driven by growth in diagnostics. Primary care revenue and Ebitda grew by 20% and 19% year-on-year, respectively, due to enhanced corporate and partner outreach, the company said.

The digital health and pharmacy distribution business revenue was up 20% at ₹2,827 crore. The company reported a net addition of 487 stores in the nine months ended December, while its online pharma transactions grew 31% in the same period.