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Apollo Hospitals sees investor confidence driven by growth opportunities

Investor confidence has received a boost from the fact that the integrated healthcare services provider has seen growth opportunities across its segments - hospitals, pharmacies, primary care, and diagnostic clinics.Premium
Investor confidence has received a boost from the fact that the integrated healthcare services provider has seen growth opportunities across its segments - hospitals, pharmacies, primary care, and diagnostic clinics.

  • Eyeing growth in the digital space, it has already separated the front-end pharmacy business and Apollo 24/7 into a separate subsidiary - Apollo HealthCo Ltd. The entry of fresh investors in this business will not only help growth but also drive value unlocking

Shares of Apollo Hospitals Enterprises Ltd having gained more than 97% year-to-date, making the company one of the strongest performers in the healthcare space. Its performance has been consistent improvement despite the surge of fresh coronavirus infections during the June quarter. 

Investor confidence has received a boost from the fact that the integrated healthcare services provider has seen growth opportunities across its segments - hospitals, pharmacies, primary care, and diagnostic clinics.

“Apollo is undergoing optical transformational journey towards creating an omnichannel healthcare platform," said analysts at ICICI Securities Ltd in their note. This could set the pace for tapping new-age investors and helping rapid scale-up of the digital healthcare platform.

The hospital segment reported that its expansions have been seeing regular scale up in performance. While occupancy in mature hospitals remained stable at 64% during the June quarter despite the pandemic, new hospitals reported significant improvement, with occupancy rising to 73% from 60% in January-March quarter. Not surprisingly, the company reported 31% sequential improvement in sales, 14% improvement in Ebitda during the June quarter.

The pharmacy business grew 35% sequentially and reported decent improvement in margin to 7.6% from 7.1 % in the previous quarter. A recent Motilal Oswal Financial Services report highlighted that private labels account for 12% of total pharmacy sales at present. Gross margin in branded pharmacies/private labels stand at 20%/~40% in. Apollo has a long-term plan to achieve 20% of pharmacy sales from private labels.

Eyeing growth in the digital space, it has already separated the front-end pharmacy business and Apollo 24/7 into a separate subsidiary - Apollo HealthCo Ltd. The entry of fresh investors in this business will not only help growth but also drive value unlocking.

There is potential to raise $200 million to enable customer acquisition and to complete its suite of offerings at Apollo HealthCo, highlighted the MOFSL report. Apollo will continue to remain the major shareholder in Apollo HealthCo.

Analysts at HDFC Securities Ltd had said Apollo 24/7 platform is scaling up well, and it is expected to reach $50-60 million in revenue by FY22-end. HDFC Securities expect Apollo 24/7 to break even by FY24 and expect the company’s diagnostics business to see steady ramp-up and achieve 500 Crore revenue by FY23, growing at 68% CAGR over FY21-23.

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