Apollo Hospitals and Fortis report profits after hitting record highs

Shares of Apollo Hospitals Enterprise Ltd. and Fortis Healthcare Ltd. ended their two-day winning streak amid a profit booking.

While Apollo certificates fell 2.6%, Fortis fell 2.1% in early trading on Wednesday. Healthcare stocks had hit record highs on Tuesday and were up 6.9% and 9% respectively on Monday.

The fall comes even as analysts applauded their better-than-estimated first-quarter results, driven by a resumption of core business, and Covid-19 testing and vaccinations, among others.

Apollo recorded a 31% sequential increase in revenue to Rs 3,760.2 crore in the quarter ended June. Its net profit jumped 191% in the previous three months to Rs 489.3 crore from an estimated Rs 165.7 crore.

Increased traction for its digital platform has also helped the Chennai-based hospital chain operator.

Separately, Fortis also saw its net profit increase more than six times to Rs 263.5 crore in the reported quarter.

  • Its revenue increased by 12.6% to Rs 1,410 crore.

  • Ebitda margin was 19.5%, up 370 basis points from the prior quarter.

In addition to the core business, an increase in average revenue per occupied bed and a focus on cost optimization contributed to the performance of the Gurugram-based company during the reporting period.

Here’s what the brokerages made of the two players’ Q1:

Apollo Hospitals

nomura

  • 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 above estimates in all segments due to the Covid pandemic and the vaccination campaign across the country.

  • Continue to love the Apollo narrative as it presents a comprehensive Indian health care drama. The company’s hospital business has the opportunity to grow organically and inorganically.

  • The company has significantly expanded its presence in retail and is the largest organized pharmacy chain in the country, and is also expanding its presence in diagnostics. The continued improvement in Ebitda margin from Pharmacy and Apollo Health and Lifestyle is encouraging.

  • The 24/7 platform is better placed than its peers, given the extensive service offering supported by offline infrastructure and lower cost of customer acquisition.

Yes Titles

  • Holds ‘sell’, raises target price from Rs 2,250 to Rs 2,750, still implying a 32% drop.

  • Apollo Guided to Rs 450 Crore Revenue for Apollo 24/7 Platform by End of FY22; although there does not appear to be any change in the three-year Ebitda break-even period.

  • E-pharmacy remains a particularly difficult economic activity – recent interactions with unlisted niche players suggest that major e-pharmaceutical players are burning between 7% and 13% after factoring in delivery and shipping costs. ‘inventory, even net of 25% discount from distributors.

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Fortis Health

ICICI titles

  • Maintains “buy” rating, raises target price to Rs 282 from Rs 268 per share, implying 19% upside potential.

  • First quarter performance was better than expected, driven by the resumption of activities in hospitals and diagnostics, continued focus on cost optimization and further upside in Covid-19 testing.

  • Expects performance improvement to continue in coming quarters and estimates strong growth in FY22.

  • Ebitda margin improved 370 basis points sequentially, driven 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 have been visible for the past several quarters.

  • Remain positive on the resumption of growth, cost optimization efforts and prospects for potential operating leverage.

Jefferies

  • Maintains holding rating, raises target price to Rs 249 from Rs 218, implying 5.1% upside potential.

  • EBITDA was 3% higher as high testing volumes resulted in operational leverage and the diagnostics business delivered record margins of 33%.

  • The high point for the quarter was non-Covid average revenue per occupied bed of Rs 52,000 per day, up 12% sequentially

  • The increase in the number of international patients would be another lever to maintain the current average income per occupied bed level.

  • If Fortis achieves an occupancy rate above 65% with such a high average revenue per occupied bed, it would surprise positively, while any decline in occupancy, average revenue per occupied bed or both would be negative for the stock. .