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Apollo Hospitals Enterprise Ltd. Overweight
APLH.BO, APHS IN
1Q FY12: Hospital growth slowdown concerning
Slowdown in hospital revenues: Revenues for hospitals (standalone) grew
14.6% YoY in 1Q, slowing from 25% growth over past few quarters. This
was led by weak performance from the mature Chennai cluster (4.3%
growth in inpatient revenues, 200bp decline in occupancy rate), which
management attributed to renovation of a facility and TN elections. We find
the slowdown concerning, though we are not yet reducing our growth
forecasts given management commentary that growth should pick up from
2Q. Performance of Hyderabad and new hospital clusters remained robust,
with new beds ramping up well. APHS continued to demonstrate strong
pricing power, with 1Q ARPOBs improving 7.3%-13.8% across clusters
Pharmacy turnaround shaping up well: EBITDA margins improved
further as APHS closed down 26 unviable stores during 1Q. Mature
pharmacies’ revenue/store was up16% YoY and EBITDA margins
improved 20bp. New pharmacy revenue/store increased 25% YoY with
EBITDA margin improvement of 610bp YoY.
1Q FY12 results summary: Consolidated revenues increased 22% YoY.
EBITDA margins declined 20bp to 16.5% with improvement in
Pharmacies’ margins offset by decline in Hospital margins (on account of
new hospitals still scaling up). Net profit increased 30% YoY to Rs545MM.
Reduce PT to Rs590 on recent equity dilution: APHS recently raised
US$75MM (Rs3.3B) through new equity issuance (QIP). According to
management this will help fund growth entailing new hospital capex of
Rs8B (we estimate Rs9.7B) until FY14E. We expect APHS to generate
operating cash of Rs11.5B over FY12-FY14 (APHS generated Rs2.6B in
FY11 vs capex of Rs3.1B). Given the net gearing level of 0.4x, we believe
that APHS could have funded its capex without resorting to the equity
dilution. We reduce our SOTP-based Mar-12 PT to Rs590 (from Rs600
earlier), incorporating the dilution impact. We remove the stock from our
Asia Analyst Focus List, given only 15% upside in the share price implied
by our price target.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Apollo Hospitals Enterprise Ltd. Overweight
APLH.BO, APHS IN
1Q FY12: Hospital growth slowdown concerning
Slowdown in hospital revenues: Revenues for hospitals (standalone) grew
14.6% YoY in 1Q, slowing from 25% growth over past few quarters. This
was led by weak performance from the mature Chennai cluster (4.3%
growth in inpatient revenues, 200bp decline in occupancy rate), which
management attributed to renovation of a facility and TN elections. We find
the slowdown concerning, though we are not yet reducing our growth
forecasts given management commentary that growth should pick up from
2Q. Performance of Hyderabad and new hospital clusters remained robust,
with new beds ramping up well. APHS continued to demonstrate strong
pricing power, with 1Q ARPOBs improving 7.3%-13.8% across clusters
Pharmacy turnaround shaping up well: EBITDA margins improved
further as APHS closed down 26 unviable stores during 1Q. Mature
pharmacies’ revenue/store was up16% YoY and EBITDA margins
improved 20bp. New pharmacy revenue/store increased 25% YoY with
EBITDA margin improvement of 610bp YoY.
1Q FY12 results summary: Consolidated revenues increased 22% YoY.
EBITDA margins declined 20bp to 16.5% with improvement in
Pharmacies’ margins offset by decline in Hospital margins (on account of
new hospitals still scaling up). Net profit increased 30% YoY to Rs545MM.
Reduce PT to Rs590 on recent equity dilution: APHS recently raised
US$75MM (Rs3.3B) through new equity issuance (QIP). According to
management this will help fund growth entailing new hospital capex of
Rs8B (we estimate Rs9.7B) until FY14E. We expect APHS to generate
operating cash of Rs11.5B over FY12-FY14 (APHS generated Rs2.6B in
FY11 vs capex of Rs3.1B). Given the net gearing level of 0.4x, we believe
that APHS could have funded its capex without resorting to the equity
dilution. We reduce our SOTP-based Mar-12 PT to Rs590 (from Rs600
earlier), incorporating the dilution impact. We remove the stock from our
Asia Analyst Focus List, given only 15% upside in the share price implied
by our price target.
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