Apollo Hospitals
In the pink of health
Increasing incidence of lifestyle diseases, medical insurance penetration, medical travel from other countries are growth drivers for the healthcare sector
| Buy | Apollo Hospitals |
| BSE Code | 508869 |
| NSE Code | APOLLOHOSP |
| Bloomberg | APHS@IN |
| Reuter | APLH.BO |
| 52-week High/Low | Rs 577 / Rs 400 |
| Current Price | Rs 487 (as on 31st October 2007) |
Apollo Hospitals is one of the largest integrated healthcare companies in the private sector in India, operating one of the largest hospital networks in Asia. Its primary line of business is the provision of healthcare services. The company generates revenues primarily through Hospital services, Dispensing pharmacies and Consultancy services.
In addition, (i) through Unique Home Health Care, wholly-owned subsidiary, it provides health care services at the patients’ door steps (ii) through Apollo Health and Lifestyle, wholly-owned subsidiary, it provides clinical and diagnostic services, (iii) through Apollo Health Street, an Associate Company, provides medical Business Process Outsourcing ('mBPO') services and (iv) Associate Company, Family Health Plan Limited, provides Third Party Administration ('TPA') services. To enhance its performance and service to customers, it also makes available the services to support business: telemedicine services, education and training programmes and research services.
All round growth
For the quarter ended September 2007, net sales increased by 27% to Rs 280.90 crore. OPM also expanded by 80 bps to 17.4%. Thus OP grew 33% to Rs 48.90 crore. Margins grew on the abck of higher occupancy and higher bed turnaround as well as higher contribution from consultancy services.
However, other income dropped by 70% to Rs 0.80 crore. As interest cost was up 16% at Rs 5.20 crore and depreciation also went up by 17% to Rs 8.90 crore, PBT grew 30% to Rs 35.60 crore.
As tax grew just 25% (effective tax rate fell by 145 bps to 33.7%), PAT increased by 33% to Rs 23.60 crore.
For the six-months ended September 2007, net sales rose to Rs 530.70 crore, up 25%. Improvement of 60 bps in OPM to 17.5% resulted operating profit growing by 29% to Rs 92.80 crore. PBT grew by 45% to Rs 77.30 crore and PAT jumped 53% to Rs 53.60 crore.
For the quarter ended September 2007, Healthcare Services grew 6% to Rs 233.60 crore. PBIT margin improved by an impressive 460 bps to 17.8%. PBIT grew 43% to Rs 41.60 crore.
For the six month ended September 2007, Healthcare Services grew 4% to Rs 443.90 crore. PBIT margin improved by impressive 400 bps to 17.4% and PBIT grew 36% to Rs 77.10 crore.
The company is primarily a hospital service provider, with most of its hospitals offering a broad range of the services including cardiology, oncology, nephrology, laboratory services, radiology and imaging, maternity and day care, general surgery as well as diagnostic and emergency services. It also provides outpatient services, including consultation for a range of ailments, preventive health screenings, laboratory services, radiology and imaging services. It has established centres of excellence in a variety of medical disciplines viz, cardiology, oncology, orthopaedics, cosmetic and plastic surgery, critical care medicine and emergency and trauma care that provides sophisticated treatment services that are offered in the leading hospitals across the world.
The segment contributed 82% of company’s sales and 90% of company’s PBIT.
Pharmacy business has great business potential and possibility of additional value creation
During the quarter, Pharmacy business was in red with a loss of Rs 1.60 crore on sales of Rs 47.30 crore and for the six months Pharmacy sales were Rs 86.80 crore but PBIT loss was at Rs 1.50 crore.
The company’s pharmacy business is among the largest in India, with a network of over 420 outlets as of 31 March 2007. The success of its pharmacy business largely to the brand value and recognition of the Apollo name. Its pharmacies offer a wide range of medicines, surgical, hospital consumables, health products and general 'over-the-counter' products. Its hospital based pharmacies form an integral part of its hospital business. The company operates pharmacies on a 24- hour basis in various locations with high visibility and revenue potential in addition to having pharmacy outlets in all Apollo hospitals. Its stand-alone pharmacies also offer free home delivery to customers living within a five kilometer radius.
Apollo Hospitals has aggressive expansion plans in pharmacy business, which is a high return-high growth sector, commanding the high valuations of retail business. Though currently making losses, this business has potential to create substantial value in future.
Increasing capacities and improving efficiencies
The company had 2,206 owned and 3,085 managed beds as of 31st March 2007 compared to 1,993 owned and 2,783 managed beds the previous year. The total number of beds owned by the Associates, JVs and Subsidiaries as of 31st March 2007 was 1,785 compared to 1,727 in 2006
The major additions in bed capacity during 2006-07 were at Bangalore, Mysore 250 beds.
The company added 107 pharmacies during FY 2007 in pursuance of its pharmacy strategy taking the total number to 420 as of 31st March 2007. The plan is to take the total strength to 1,000 by 31st March 2009:
The occupancy improved from 72% to 77% during the year. The collections per bed day improved from Rs 7,245 last year to Rs 7,563 in FY 2007.
The total number of ICU beds stood at 341 as on 31st March 2007 compared to 305 as of 31st March 2006, an increase of 3.5%.
The total number of operation theatres is 52 as on 31st March 2007 compared to 45 as on 31st March 2006.
The company wide average length of stay (ALOS) stood at 5.5 days compared to 5.7 last year and the collections growth registered an increase of 26% over the previous year
Setting up speciality hospitals
The company has procured 10 acres in Vizag and 7.5 acres in Bhubaneshwar to set up super speciality hospitals in these locations. These hospitals are expected to be commissioned during March 2009. It has also procured 125,000 sq.ft leased building on E.V.R. Periyar Salai to set up Ortho and Cosmetic Center.
Places shares at Rs 605 to raise Rs 426 crore
Apollo Hospitals Enterprise Ltd has informed the Exchange vide its letter dated October 26, 2007 that "The Committee of Board of Directors at its meeting held approved the allotment of 7,047,119 equity shares of face value of Rs 10/- each at a price of Rs 605.07 per share to Apax Mauritius FDI One Limited".
Encouraging macro environment
The Indian healthcare sector is poised to grow at a compounded annual growth rate of 15%, according to the Ernst & Young healthcare survey. Nearly 90% of this growth will come from the private sector. Further, private hospitals in the country are expected to have revenue earnings of $35.9 Billion (Rs 147,154.1 crore) in 2012 compared to $15.5 Billion (Rs 63,534.5 crore) in 2006. Correspondingly, along with a shift in emphasis from socialized to privatized healthcare, the share of the private sector in India's healthcare industry is set for a quantum increase in the coming decade.
Healthcare spending is on an upward track due to a number of reasons. The first is that India lags behind most nations on all key indicators of healthcare delivery e.g., per capita spend, beds per 1000 people, nurses/doctors per 1000 people, insurance penetration etc. Secondly, as Indians become more affluent, there is a greater propensity to spend on health. Another reason is that people are becoming increasingly aware of the need to focus on preventative health and the need to gain access to quality facilities. Access to quality healthcare in the private sector till now has largely been restricted to the affluent class, essentially due to the high cost of delivery. However, this is changing dramatically with the advent of health insurance as a preferred tool to finance most healthcare expenditures. Health insurance is destined to grow exponentially in the coming years with large players entering the market with a wider choice of product offerings & schemes.
The shift in disease profile from infectious diseases to lifestyle diseases is expected to raise cost per treatment. In a study recently done it has been determined that the average spend on lifestyle diseases is Rs 40,500 per inpatient treatment, whilst that on an infectious disease is just Rs 5,520. India's disease profile is also expected to follow the same profile pattern as in the developed economies. Based on demographic trends and disease profile, lifestyle diseases comprising cardiovascular, diabetes, orthopaedics, asthma & cancer have become the most important segments and inpatient spending is expected to rise from 39% to nearly 50% of the total healthcare expenditure over the next few years. Research has shown that Indians have a high propensity for cardiac disease and that approximately 50% of all cardiac patients across the world be Indians by the year 2015.
India's position as a destination for medical value travel (or medical tourism as it is loosely referred to) will also strengthen significantly in coming years.
Overall in a favourable macro environment, Apollo Hospitals will be able to grow at a healthy rate on a sustained basis.
Valuation
In FY 2008, we expect Apollo Hospitals to register sales and net profit of Rs 1113.45 crore and Rs 98.40 crore respectively. On current equity of Rs 58.65 crore (after recent private placement) and face value of Rs 10 per share, EPS works out to Rs 16.8. The share price trades at Rs 487. P/E works out to 29.0.
| | 0503 (12) | 0603 (12) | 0703 (12) | 0803 (12P) |
| Sales | 592.70 | 707.8 | 891 | 1113.45 |
| OPM (%) | 18.0 | 16.2 | 15.9 | 16.4 |
| OP | 106.70 | 114.9 | 141.8 | 183.13 |
| Other inc. | 2.90 | 11.2 | 8.5 | 14.40 |
| PBIDT | 109.60 | 126.1 | 150.3 | 197.53 |
| Interest | 15.60 | 11.7 | 16.4 | 19.23 |
| PBDT | 94.00 | 114.4 | 133.9 | 178.30 |
| Dep. | 22.60 | 26.1 | 30.8 | 35.69 |
| PBT | 71.40 | 88.3 | 103.1 | 142.61 |
| Tax | 22.20 | 28.1 | 32.2 | 44.21 |
| PAT before PPA | 49.20 | 60.2 | 70.9 | 98.40 |
| EPS (Rs)* | 8.4 | 10.3 | 12.1 | 16.8 |
| * Annualized on current equity of Rs 58.65 crore. Face Value: Rs 10 | ||||
| Apollo Hospitals: Results |
| | 0709 (3) | 0609 (3) | Var. (%) | 0709 (6) | 0609 (6) | Var. (%) | 0703 (12) | 0603 (12) | Var. (%) |
| Sales | 280.9 | 220.7 | 27 | 530.7 | 424.8 | 25 | 891 | 707.8 | 26 |
| OPM (%) | 17.4 | 16.6 | | 17.5 | 16.9 | | 15.9 | 16.2 | |
| OP | 48.9 | 36.7 | 33 | 92.8 | 71.9 | 29 | 141.8 | 114.9 | 23 |
| Other inc. | 0.8 | 2.7 | -70 | 10.4 | 3.8 | 174 | 8.5 | 11.2 | -24 |
| PBIDT | 49.7 | 39.4 | 26 | 103.2 | 75.7 | 36 | 150.3 | 126.1 | 19 |
| Interest | 5.2 | 4.5 | 16 | 8.7 | 7.4 | 18 | 16.4 | 11.7 | 40 |
| PBDT | 44.5 | 34.9 | 28 | 94.5 | 68.3 | 38 | 133.9 | 114.4 | 17 |
| Dep. | 8.9 | 7.6 | 17 | 17.2 | 15 | 15 | 30.8 | 26.1 | 18 |
| PBT | 35.6 | 27.3 | 30 | 77.3 | 53.3 | 45 | 103.1 | 88.3 | 17 |
| Tax | 12 | 9.6 | 25 | 23.7 | 18.3 | 30 | 32.2 | 28.1 | 15 |
| PAT before PPA | 23.6 | 17.7 | 33 | 53.6 | 35.0 | 53 | 70.9 | 60.2 | 18 |
| PPA | 0 | 0 | 0 | 0 | 0 | 0 | 3.3 | 0 | PL |
| PAT after PPA | 23.6 | 17.7 | 33 | 53.6 | 35 | 53 | 67.6 | 60.2 | 12 |
| EO | 0 | 32.5 | PL | 0 | 32.5 | -100 | 32.5 | 0 | LP |
| Net Profit | 23.6 | 50.2 | -53 | 53.6 | 67.5 | -21 | 100.1 | 60.2 | 66 |
| EPS (Rs)* | 16.1 | 12.1 | | 18.3 | 11.9 | | 12.1 | 10.3 | |
| * Annualized on current equity of Rs 58.65 crore. Face Value: Rs 10 | |||||||||
| Apollo Hospitals: Segment Result |
| | 0709 (3) | 0609 (3) | Var (%) | % to total | 0709 (6) | 0609 (6) | Var (%) | % to total | 0703 (12) | 0603 (12) | Var (%) | % to total |
| Sales | | | | | | | | | | | | |
| Healthcare Services | 233.60 | 220.70 | 6 | 83 | 443.90 | 424.80 | 4 | 82 | 759.80 | 709.80 | 7 | 82 |
| Pharmacy | 47.30 | 0.00 | 999 | 17 | 86.80 | 0.00 | 999 | 16 | 131.20 | 0.00 | 999 | 14 |
| Others | 0.80 | 35.20 | -98 | 0 | 10.40 | 36.30 | -71 | 2 | 41.00 | 11.20 | 266 | 4 |
| Total | 281.70 | 255.90 | 10 | 100.00 | 541.10 | 461.10 | 17 | 100.00 | 932.00 | 721.00 | 29 | 100.00 |
| Less: inter-segment revenue | 0.00 | 0.00 | 0 | | 0.00 | 0.00 | 0 | | 0.00 | 0.00 | 0 | |
| Net Sales | 281.70 | 255.90 | 10 | | 541.10 | 461.10 | 17 | | 932.00 | 721.00 | 29 | |
| PBIT | | | | | | | | | | | | |
| Healthcare Services | 41.60 | 29.10 | 43 | 102 | 77.10 | 56.90 | 36 | 90 | 112.10 | 89.60 | 25 | 74 |
| Pharmacy | -1.60 | 0.00 | PL | -4 | -1.50 | 0.00 | PL | -2 | -1.10 | 0.00 | PL | -1 |
| Others | 0.80 | 35.20 | -98 | 2 | 10.40 | 36.30 | -71 | 12 | 41.00 | 10.40 | 294 | 27 |
| Total | 40.80 | 64.30 | -37 | 100.00 | 86.00 | 93.20 | -8 | 100.00 | 152.00 | 100.00 | 52 | 100.00 |
| Less: Interest | 5.20 | 4.50 | 16 | | 8.70 | 7.40 | 18 | | 16.40 | 11.70 | 40 | |
| other unallocable expenditure | 0.00 | 0.00 | 0 | | 0.00 | 0.00 | 0 | | 0.00 | 0.00 | 0 | |
| PBT | 35.60 | 59.80 | -40 | | 77.30 | 85.80 | -10 | | 135.60 | 88.30 | 54 | |
| Capital employed | | | | | | | | | | | | |
| Healthcare Services | 799.70 | 721.00 | 11 | 78 | 799.70 | 721.00 | 11 | 78 | 683.30 | 599.00 | 14 | 76 |
| Pharmacy | 61.10 | 0.00 | 999 | 6 | 61.10 | 0.00 | 999 | 6 | 38.20 | 0.00 | 999 | 4 |
| Others | 164.70 | 133.20 | 24 | 16 | 164.70 | 133.20 | 24 | 16 | 175.20 | 136.50 | 28 | 20 |
| Total | 1025.50 | 854.20 | 20 | 100.00 | 1025.50 | 854.20 | 20 | 100.00 | 896.70 | 735.50 | 22 | 100.00 |
| Add: Unallocable CE | 0.00 | 0.00 | 0 | | 0.00 | 0.00 | 0 | | 0.00 | 0.00 | 0 | |
| Total capital employed | 1025.50 | 854.20 | 20 | | 1025.50 | 854.20 | 20 | | 896.70 | 735.50 | 22 | |
| Figures in crore | 17.81 | 13.19 | 462 | | 17.37 | 13.39 | 397 | | | | | |
| Source: Capitaline corporate database | ||||||||||||
BigGains !!
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe
__,_._,___
No comments:
Post a Comment