Apollo Hospital Enterprise (APLH.BO, Buy, PT Rs 650, 22% upside):: UBS: India Mid-Caps TOP PICKS - September 2011

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• Leading healthcare service which manages 3,800 owned
beds and 1,500 managed beds and a chain of 1,100 Apollo
Pharmacy stores in India.
• Stable revenue profile. From Q1 FY09 to Q4 FY11, it
reported sequential revenue growth every quarter (average
of 5%).
• Brand, leadership in healthcare technology, and scale are
critical in healthcare services; APLH ranks high on all these
counts.
• New hospitals launched within last 2 years progressing well.
Bhubaneswar and Karimnagar are EBITDA positive within
second year of operation.
• Apollo Hospitals needs Rs9bn over next two years to fund
expansion. It has raised Rs3bn as equity and plans to raise
another Rs6bn through debt and internal accruals.
• Shareholding: Promoter - 32%.
• Valuation: DCF using VCAM (assume WACC of 11.85%
and terminal sales growth of 5.6%). Implied FY13E
EV/EBITDA 13.3x; and Rs 25 for value of associates.

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