Apollo Hospitals is now well into its consolidation phase with limited capex and operating leverage gains over the next few years. Most hospitals saw improved operating metrics and margins / RoCE moved up.

Significant bed additions in the past 5 years have impacted profitability; ~2,000 beds (~1/3rd of total beds) added since 4QFY13.

With no major bed additions in the next 2-3 years, APHS is strongly positioned to drive operational efficiencies and to ramp up occupancies at its new hospitals.

There is significant scope for expanding margins in APHS’ pharmacy business (5.6% EBITDA margin in 1QFY20). Margins should also benefit from complete integration of the acquired Hetero network and increased contribution from private labels.

AHLL (subsidiary) which is currently loss making (Rs. 1.1bn/Rs. 600mn of EBITDA losses in FY18/FY19) is expected to breakeven in FY20 and should contribute significantly to APHS’s long term growth.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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