Apollo Hospitals, Fortis See Profit-Booking After Hitting Record Highs
Here's what brokerages made of the Q1 results of the two hospital chain operators...
Shares of Apollo Hospitals Enterprise Ltd. and Fortis Healthcare Ltd. snapped their two-day gaining streak amid profit-booking.
While Apollo’s scrip declined as much as 2.6%, Fortis fell 2.1% in early trade on Wednesday. The healthcare stocks had hit record highs on Tuesday, and had advanced 6.9% and 9%, respectively, on Monday.
The fall comes even as analysts cheered their above-estimated first-quarter results, driven by a recovery in core businesses, and Covid-19 tests and vaccinations, among others.
Apollo has posted a 31% sequential jump in revenue at Rs 3,760.2 crore in the quarter ended June. Its net profit surged 191% over the preceding three months to Rs 489.3 crore, against the estimated Rs 165.7 crore.
An increased traction for its digital platform, too, helped the Chennai-based hospital chain operator.
Separately, Fortis, too, saw a more than a sixfold sequential jump in net profit at Rs 263.5 crore during the reported quarter.
Its revenue grew 12.6% to Rs 1,410 crore.
Ebitda margin was at 19.5%, up 370 basis points over the preceding quarter.
Besides core business, a rise in average revenue per occupied bed and focus on cost optimisation aided the performance of the Gurugram-based company during the reported period.
Here's what brokerages made of the two players' Q1:
Maintains 'buy' rating, raises target price to Rs 4,746 from Rs 3,831, implying a potential upside of 16.8%.
Sales and Ebitda were higher than estimates across all segments owing to benefit from the Covid pandemic and vaccination drive across the country.
Continues to like the narrative on Apollo, as it presents a comprehensive play on India healthcare. The company’s hospital business has scope to grow organically and inorganically.
The company has significantly expanded its retail presence and is the largest organised pharmacy chain in the country, and is also expanding its presence in diagnostics. Consistent improvement in Ebitda margin of pharmacy and Apollo Health and Lifestyle is encouraging.
The 24x7 platform is better placed vs peers given wide service offering supported by an offline infrastructure and lower customer acquisition cost.
Maintains 'sell', raises target price from Rs 2,250 to Rs 2,750, still implying a downside of 32%.
Apollo has guided to Rs 450 crore of revenue for Apollo 24/7 platform by end FY22; albeit, there does not appear to be any change to Ebitda break even period of three years.
E-pharmacy remains a business with particularly harsh economics— recent interactions with niche unlisted players suggests major e-pharmacy players burn anywhere between 7% and 13% after factoring delivery and inventory costs even net of 25% discount from distributors.
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Maintains 'buy' rating, raises target price to Rs 282 from Rs 268 per share, implying an upside potential of 19%.
Q1 performance was better than estimates driven by business recovery across hospitals and diagnostics, continued focus on cost optimisation and incremental upside from Covid-19 tests.
Expects the performance improvement to continue in coming quarters and estimate strong growth in FY22.
Ebitda margin improved 370 bps sequentially led by higher revenue driving operating leverage and cost control.
Management has taken steps to reduce personnel and selling, general and administrative expenses and the benefits are visible from last few quarters.
Remains positive on growth recovery, cost optimisation efforts and potential operating leverage outlook.
Maintains 'hold' rating, raises target price to Rs 249 from Rs 218, implying an upside potential of 5.1%.
Ebitda was 3% above as high testing volumes kicked in operating leverage effect and diagnostic business registered record margins of 33%.
The key highlight for the quarter was non-Covid average revenue per occupied bed of Rs 52,000 per day which was up 12% sequentially
Increasing international patient would be other lever for sustaining the current average revenue per occupied bed levels.
If Fortis achieves 65%+ occupancy at such high average revenue per occupied bed, it would positively surprise, while any dip in occupancy, average revenue per occupied bed or both would be negative for the stock.