BUY Apollo Hospital, :: ICICI Securities, link

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Apollo Hospitals - In for the Long Haul; Result Update Q2FY15:: Edelweiss

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Apollo Hospitals:Upgrade to Buy Stock underperformance and revenue growth acceleration make risk-reward favourable:: Nomura research,

Action: Upgrade to Buy, TP raised to INR974
APHS has underperformed its peers over the past 12 months, with the
stock up 2% vs. an average return of 14% for regional peers. In our view,
Apollo’s stock performance has been adversely impacted by a slowdown
in growth and delay in certain projects. However, despite recent slippages,
we think Apollo’s long-term growth prospects remain intact. We now
expect revenue growth to accelerate as new capacities are commissioned.
We reduce our FY14/15F EPS by 9-10%, which we believe are already
factored in the stock performance. The stock currently trades at 31.5x
one-year forward EPS, which is close to its historical average. We value
APHS at a P/E multiple of 30x (unchanged) one-year forward EPS of
INR32.5. On average, over the past five years, the stock has traded at 30x
one-year forward EPS. Our TP implies potential upside of ~16% from
current levels. Upgrade to Buy.
Catalyst
Successful commissioning of key facilities, ramp-up in financials.
Valuation
The stock currently trades at 31.5x one-year forward EPS of INR26.7, at a
10% premium to regional peers. We believe the premium valuation is
justified given the stronger growth potential for APHS. We estimate APHS'
profit to be equal to the current profit of IHH (IHH MK, NR) and Bangkok
Dusit (BGH TB, Neutral) by FY20F. Assuming APHS has the same market
cap by then, it would imply an annual return of 20-33%% over the period.

Apollo Hospitals Enterprises Limited (AHEL) Target Price: ` 608.00 :: Omi Advisors 2012 Ideas

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About the Company
Apollo Hospitals Enterprises Limited (AHEL) is an Indian company into the healthcare business. AHEL is one of Asia’s largest
healthcare groups. The company has presence at the every touch point of the medical value chain and has presence both in India
and abroad.
In the medical field, the business of the company is diversified into diagnostics clinic, pharmacies, medical business process
outsourcing, hospital consultancy and health insurance. Through its subsidiary, Unique Home Health Care Limited, the company
provides medicines and paramedical services to the door steps of the patients.
Investment Rationale
In the last 18 months, AHEL has added about 850 beds and has plans to add 150 more beds by the end of the year. In FY13 it has
plans for 730 new beds and in FY14 for 1,350 new beds. AHEL is aiming to have 49 fully owned hospitals with 10,000 beds across
the country by 2014. The company has finalized six sites for its expansion plans which are in Mumbai, Nashik and Tiruchi. This
requires an investment of ` 16bn which will be funded through debt and equity. It is also looking to expand its footprint in tier-II and
tier-III cities.
AHEL is focused on reducing average length of stay (ALOS) and increase ARPOB through pricing and case-mix improvement


Valuation
At the current level the stock is trading at 20.26x to the earnings of FY13E and 16.75x to the earnings of FY14E. Standalone topline
and bottomline of the company are expected to grow at a CAGR of 27% and 29% respectively over FY11 to FY14E. We recommend
investors to buy this scrip with a target price of ` 608.00 per share for long term.

Buy Apollo Hospitals - Value unlocking from FDI in Retail :: Edelweiss

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Apollo Hospitals (APHS IN, INR 602, Buy)

Apollo (APHS) has been seeking strategic options for its pharmacy business in form of IPO, divestment or spun-off and has tried to operationally stabilize and improve profitability of pharmacies. The union cabinet nod to FDI in Retail could fast track management decision and would be accretive to overall profitability; we estimate 3-4% upside to FY13E EPS. Moreover, management is keen to increase the size of operations and profitability of business before offering the stake. Apollo’s planned 2,800 bed additions over the next three years and its ability to manage costs will drive 20% CAGR in earnings. Maintain ‘BUY’.

FDI opens doors to rope in strategic partner

The Union Cabinet’s nod to FDI in retail could benefit Apollo Hospitals, which operates one of the largest retail pharmacy chains with ~ 1,300 retail outlets. Apollo Retail Pharmacies has pan-India presence with 40% outlets in NCR and 60% in South. The retail pharmacies come under multi-brand retail concept and hence 51% FDI could help rope in a strategic partner. While management has yet not finalized timelines for the same, the strategy focus to divest stake could move on fast track.

Potential unlocking of value

Retail pharmacies (SAPs) are 27% of total sales, growing at 30% YoY (H1FY12) with 1.8% EBITDA margin and 0.5% EBIT margin. Thus, the option to rope in a strategic partner, post FDI approval, was on the cards as it would unlock value of the hospitals business and reap in cash which can be utilized for investments that offer better returns.

Outlook and valuations: Value unlocking; maintain ‘BUY’

Our TP of INR626 per share includes INR64 per share from retail pharmacies, which is ~ INR6.1mn per pharmacy or 1.3x FY13E pharmacy sales. Management has guided potential valuation of INR10mn per pharmacy (1.5x sales). We estimate divestment of 51% stake to a foreign partner to be accretive to FY13E EPS by 3-4%. Our valuations are based on DCF with implied 14.5x FY13E EV/EBITDA.

Apollo Hospitals: Growth intact :Kotak Sec,

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Apollo Hospitals (APHS)
Pharmaceuticals
Growth intact. PAT ex-forex was 3% below our estimate due to lower sales growth on
account of slower growth in the Chennai cluster, which picked up sequentially but still
lower than our expectation. However, operating margin was higher than our estimate
by 50 bps. We leave our FY2012-13E consolidated estimates largely unchanged and
expect FY2012E sales growth at 20% (21% in 1HFY12) and EBITDA margin at 16.7%
(16.6% in 1HFY12). Maintain ADD; PT Rs650 (unchanged), 14X FY2013E EBITDA.

Hold Apollo Hospitals; Target : Rs 545 ::ICICI Securities

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R e s u l t s   i n   l i n e ;   s t o c k   f a i r l y   v a l u e d …
Apollo Hospitals’ revenues grew 19.3% YoY to  | 699.8 crore (I-direct
estimate:  |  688.4 crore) with the hospital and pharmacy segment’s
revenue growing 17% and 25% YoY, respectively. The growth in
revenues was in line with our expectations that mainly came in from the
Hyderabad cluster recording strong revenue growth on the back of new
beds added over the last 15 months. Average revenue per bed (ARPOB)
also increased by 12% YoY in H1FY12. This, in turn, helped the company
to maintain its margins at over 17%  for this quarter. Interest costs for
the quarter rose sharply by 51% on  account of incurring of unrealised
forex translation charge to the tune of | 3.3 crore. As a result, net profit
remained marginally lower than our expectations at | 55.8 crore (I-direct
estimate: | 56.5 crore) despite a better operating performance.
Revenue grows at healthy pace, remains above our expectations
During the quarter, operating revenues registered growth of 19.3% YoY
and 9.2% QoQ, respectively. The growth remained above our estimates
on account of healthy growth in both segments, hospitals as well as
pharmacy. The hospital segment growth mainly came in from the
Hyderabad cluster on the back of new beds added over the last 15
months and a 12% YoY jump in revenue per bed (ARPOB). However,
average occupancy declined marginally by 200 bps YoY to 72%. The
pharmacy segment (that accounts for nearly 30% of topline) registered
strong topline growth of over 25.4% due to 13% increase in number of
outlets and 12.4% YoY jump in revenue per store for the quarter.
V a l u a t i o n s
The company has consistently maintained its growth trajectory while
strong company fundamentals with a healthy sector outlook support our
positive view on the company although likely capex of  | 1,646 crore is
expected to impact its return ratios marginally, going ahead. At the CMP
of  | 547, the stock is trading at 15.3x and 12.6x its FY12E and FY13E
EV/EBITDA, respectively. We believe it is fairly valued at FY13E earnings
multiple. Hence, we continue to maintain our target price to | 545 (i.e. at
12.5x FY13E EV/EBITDA) with a HOLD rating on the stock.

UBS: Apollo Hospitals Enterprise - News reports about CBI raids on one of the directors: Nothing new

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UBS Investment Research
Apollo Hospitals Enterprise
News reports about CBI raids on one of the
directors: Nothing new
􀂄 Event: Media reports about CBI raid on one of the directors
There are some media reports of a CBI raid against one of the directors, and key
shareholder of Apollo Hospitals in context of her role in the Aircel/Maxis deal. We
spoke with the company and as per the company, this is in continuation of prior
CBI questioning of the same director. The director has a stake in Aircel through a
separate entity and not through Apollo Hospitals. Also, Maxis has clarified that it
holds 99% economic interest in Aircel, through the Apollo Hospitals director. We
think this newsflow is not a new event.
􀂄 Impact: No impact on Apollo Hospitals
We expect that this newsflow is not important to Apollo Hospitals.
􀂄 Action: Reiterate Buy rating and Rs650 price target
We believe that the current newsflow will not impact Apollo Hospitals’
fundamentals. We believe Apollo Hospitals provides an attractive investment
opportunity to investors to invest in a secular growth story in the Indian healthcare
space. We retain our Buy rating and Rs650 price target.
􀂄 Valuation: sum of the parts
We base our price target on our sum-of-the-parts valuation methodology, valuing
the consolidated entity (Rs625/share) on DCF. We explicitly forecast long-term
valuation drivers using UBS’s VCAM tool (assuming an 11.85% WACC). At our
price target, Apollo Hospitals would trade at 13.3x FY13E EV/EBITDA.




See full list -click link below:

UBS Mid-Caps Strategy - What to Buy? �� Oct 2011 Update

UBS: Apollo Hospitals -News-reports about CBI raids on one of the directors

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UBS Investment Research
First Read: Apollo Hospitals
News-reports about CBI raids on one of the
d irectors: Nothing new
􀂄 Event: Media reports about CBI rain on one of the directors
There are some media reports of CBI raid against one of the directors, and key
shareholder of Apollo Hospitals in context of her role in the Aircel/Maxis deal.
We spoke with the company and as per the company this is in continuation of prior
CBI questioning of the same director. The director has a stake in Aircel through a
separate entity and not through Apollo Hospital. Also Maxis has clarified that it
holds 99% economic interest in Aircel, through the Apollo Hospitals director. We
think this news-flow is not a new event.
􀂄 Impact: No impact on Apollo Hospitals
We expect that this news-flow is not important to Apollo Hospitals.
􀂄 Action: Reiterate Buy rating and Rs650 price target
We believe that the current news-flow will not impact Apollo Hospitals’
fundamentals. We believe that Apollo Hospitals provides an attractive investment
opportunity to investors to invest in a secular growth story in the Indian healthcare
space. We retain our Buy rating and Rs650 price target on APLH.
􀂄 Valuation: sum of the parts
We base our price target on our sum-of-the-parts valuation methodology, valuing
the consolidated entity (Rs625/share) on DCF. We explicitly forecast long-term
valuation drivers using UBS’s VCAM tool (assuming an 11.85% WACC). At our
price target, Apollo Hospitals would trade at 13.3x FY13E EV/EBITDA.


Apollo Hospitals Enterprise
Apollo Hospitals owns and manages a network of tertiary and higher secondary
care hospitals and clinics. It also operates a pharmacy chain. It has a stake in
Apollo Health Street, a medical business process outsourcing company. Apollo
Hospitals manages around 8,500 beds (5,376 in owned hospitals and 2,588 in
managed hospitals) in 46 hospitals, and a chain of 1,100 Apollo Pharmacy stores
in India.
􀁑 Statement of Risk
Hospitals require high upfront investment and have high fixed costs.
Consequently, we believe any increase in competition can impact volumes and
pricing, and subsequently impact operating profit. Additionally, land prices in
India have been rising and it is becoming increasingly more expensive to acquire
land for expansion and this could affect future profitability. Other risks include
regulatory and tax changes, doctor attrition and the lack of an internationally
recognised auditor.

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.

CLICK HERE TO RETURN TO LIST OF UBS TOP PICK

Apollo Hospitals - Numero Uno :: Macquarie Research,

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Apollo Hospitals
Numero Uno
Event
􀂃 We initiate coverage on Apollo Hospitals (APHS IN) with an OP rating and a
target price of Rs645. Given the track-record, scale, pan India presence,
strong brand-equity and integrated healthcare delivery model APHS remains
strategically well positioned to capitalize on the domestic healthcare growth.
Increasing focus on Tier II and Tier III cities and a potential pharmacy
business turnaround further add to the investment appeal.
Impact
􀂃 Numero uno: Apollo has been the pioneer of corporate hospitals and now
has the largest network of hospitals (5,842 owned and 2,875 managed beds
of which 4,986 are operational).Given the scale with a large proportion of
mature hospitals, APHS is well positioned to grow profitably despite
aggressive planned bed additions. APHS has mainly followed an organic
route to date and has consistently grown ahead of the industry growth rate.
􀂃 Hospitals running the show: The hospital business constitutes ~73% of the
revenue and ~99% of operating profit for APHS. A strong foothold in south
India with mature hospitals (Chennai and Hyderabad clusters contribute >
55% of hospitals revenue) remains the key driver medium term along with
being a cash cow that will likely help fuel planned expansions. APHS has
plans to add ~2,400 beds (> 40% of current owned beds) by FY14 with an
additional capex of ~Rs8.5b.Access to capital is a competitive edge post the
recent successful QIP of Rs3.3b and another Rs2b due post the exercising of
warrants by promoters.
􀂃 Integrated healthcare delivery model: APHS has a presence in the majority
of healthcare verticals including hospitals, pharmacy stores (~1,200 stores),
health insurance and a healthcare BPO. This gives APHS an edge over
competitors given the strong brand equity leveraged across the network.
􀂃 Pharmacy business turnaround: A maturing store-mix of pharmacy
operation and incremental focus on profitability (vs. expansion earlier) is likely
to be accretive to overall operating profit. The potential listing (including stake
dilution to a strategic partner) of the pharmacy business and likely divestment
of the healthcare BPO business could unlock significant value, in our view,
going forward.
Earnings and target price revision
􀂃 Initiating coverage with Outperform rating and TP of Rs645.
Price catalyst
􀂃 12-month price target: Rs645.00 based on an EV/EBITDA methodology.
􀂃 Catalyst: 1) Pharmacy business turnaround 2) Maturing hospitals
Action and recommendation
􀂃 We value APHS at 14x FY13E EV/EBITDA at a relative premium to its global
peers and in line with its historical mean. We estimate 20% revenue and 22%
EBITDA cagr between FY11-14E and believe the premium valuations could
sustain given significant growth opportunity ahead.

Apollo Hospitals: 30% PAT growth, yet again ::Kotak Sec,

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Apollo Hospitals (APHS)
Pharmaceuticals
30% PAT growth, yet again. PAT at Rs513 mn was in line with our estimate with (1)
sales growth of 22% despite muted performance at the Chennai cluster and EBITDA
margin of 16.5%, in line with our estimate. We increase our FY2012-13E consolidated
estimate by 6-3% due to higher other income and believe operating performance will
likely improve with (1) healthcare services growth expected to pick up to >20% from
18% in 1QFY12 which was affected by muted growth at Chennai (30% of
consolidated sales), (2) pharmacies sustaining 36% growth with positive EBITDA and
(3) improving operating performance in new hospitals ( around 1,000 beds added in the
past 18 months). Maintain BUY with PT at Rs565 (unchanged), 12X FY2013E EBITDA


1QFY12 total income at Rs6.4 bn, in line with our estimates
Total income grew 22% yoy to Rs6.4 bn in 1QFY12, largely in line with our estimates led by (1)
sustained performance in SAP which reported 36% sales growth, in line with FY2011 sales growth
and (2) 18% growth in healthcare services, however, down qoq due to poor patient volume at
Chennai. The quarter witnessed improving operating performance driven by (1) significant increase
in ARPOB across all hospitals on account of improving case mix and pricing increase, (2)
improvement in occupancy ratios in Hyderabad on increased bed capacity and in JVs and (3)
reduction in length of stay in Chennai and Hyderabad. We expect sales growth to pick up as
occupancies improve in new hospitals. Apollo added 1,000 beds and around 500 operational beds
in the past 18 months across Hyderabad, Bhubaneswar and Secunderabad.
EBITDA margin in 1QFY12 at 16.5%, down 130 bps yoy
EBITDA margin of 16.5% in 1QFY12 was down 40 bps yoy, 20 bps higher than our estimate,
however, down 130 bps yoy. We believe the reported margin of 16.5% adjusted for the impact at
Chennai which is an established high-margin cluster would have been at least 50 bps higher.
Maintain BUY with PT at Rs565 (unchanged)
We increase our FY2012-13E consolidates estimate by 6-3% due to higher other income with our
operational assumptions intact. We factor in 16-16.7% margin in FY2012-13E with overall sales
growth at 25% and 20%, respectively. Although there will be no significant addition to beds in
the next 15 months, we expect strong sales growth reported in FY2011 to continue on account of
(1) maturity of newly opened hospital beds and (2) improving profitability in SAP and JV/subsidiary
hospitals. Apollo trades at 13X FY2012E EBITDA. We value Apollo at Rs565, 12X FY2013E EBITD

Apollo Hospitals - 1Q FY12: Hospital growth slowdown concerning:: JPMorgan

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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.

Hold Apollo Hospitals; Target :Rs 545 ::ICICI Securities,

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R e s u l t s   i n l i n e ,   o u t l o o k   s t a b l e …
Apollo Hospitals’ revenues grew 22.5% YoY to | 641 crore (I-direct est:
|  643.1 crore) with the hospital  and pharmacy segment’s revenue
growing 17.7% and 35.9% YoY, respectively. The growth in revenues
was inline with our expectations that mainly came in from Hyderabad
cluster recording a strong growth of over 30% YoY on the back of new
beds added over the last 15 months. Average revenue per bed (ARPOB),
for the company, increased by 8%YoY. However, higher operating costs
led operating margins to fall by 35 bps to 16.5%.  Interest costs for the
quarter declined by 5.3% on account of part repayment of debt. As a
result, net profit remained marginally above our expectations at | 51.3
crore (I-direct estimate: | 50.8 crore).
Revenue grows at healthy pace, remains inline our expectations  
During the quarter, operating revenues registered growth of 22.5% YoY
and 3.2% QoQ, respectively. The  growth remained inline with our
estimates on account of healthy growth in both segment, hospitals as
well as pharmacy segment. Hospital segment growth mainly came in
from Hyderabad cluster on a back of new beds added over the last 15
months and 8%YoY jump in revenue per bed (ARPOB). However, average
occupancy declined marginally  by 100bps YoY to 73%. Pharmacy
segment that accounts for nearly 30% of topline) registered strong topline
growth of over 36% due to 18% YoY jump in revenue per store for the
quarter. Hospital segments revenue also grew by ~18% YoY to Rs.451.4
crore backed by strong topline growth reported by Hyderabad cluster
(growth of 30.8% YoY).  
V a l u a t i o n s
At the CMP of |517 the stock is trading at 14.4x and 11.7x its FY12E and
FY13E EV/EBITDA, respectively.  The company has consistently
maintained its growth trajectory and strong company fundamentals and
healthy sector outlook supports our positive view on the company,
although likely capex of |1,125 cr. is expected to impact its return ratios
marginally going ahead. We value the stock at 12.5x FY13E EV/EBITDA
and maintain our target price of Rs.545 with “HOLD” rating on the stock

Apollo Hospitals (APLH.BO; :: Takeaways from Citi India Investor Conference – Day 2

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Apollo Hospitals (APLH.BO; Rs482.85; 1L)
 Takeaways from Mumbai — Apollo hospitals presented at the Citi India Investor
Conference in Mumbai. Below are the key takeaways.
 What’s New — The company reiterating its intent to expand aggressively in the
hospitals biz and consolidate its presence in retail pharmacies. Efforts to become
more of a pure hospitals play would continue as it looks for strategic options for the
retail pharmacy and healthcare BPO businesses.
 Update on Retail Pharmacy biz — Plans to add at least 200 pharmacies every
year and ramp up to achieve critical mass with improvement in profitability. Scale of
the combined biz (with hospital pharmacies) has helped overall profitability. APLH

has increased its value-added services at the pharmacy level to take advantage of
the reach and will continue to look for a strategic partners/stake sale for the biz.
 Update on Hospitals biz — 1) APLH wishes to dominate the markets where they
are present; 2) Add 2,400 bed capacity up to FY14; 3) Opening 3 hospitals in
Mumbai by FY14 with a capacity of 900 beds; 4) Chennai cluster EBITDA margin is
now higher than 30%; and 5) Kolkata hospital EBITDA margin in the range of 20-
25%.
 Other Key takeaways — 1) Capex requirement up to FY14 is cRs10bn (includes
Rs1bn of routine capex); 2) Majority of Apollo Clinics are franchised but APLH to
focus on setting up own clinics given the returns; 3) APLH now owns c45% of Apollo
Healthstreet.
 Maintain Buy — We remain positive on the healthcare delivery space in India and
maintain our Buy rating on the stock.

Apollo Hospitals Enterprise: Buy; PT Rs650 􀁑 :: UBS India Mid-Cap Premier League - Season 1

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Apollo Hospitals Enterprise: Buy; PT Rs650
􀁑 New hospitals launched within last 18 months progressing well.
Bhubaneswar and Karimnagar are EBITDA positive within second year of
operation. Karimnagar has ARPOB of 4400 Rs/bed day and Bhubaneswar
has ARPOB of 13,500 Rs/bed day (including hospital based pharmacy
revenue). New launches in Hyderguda on schedule and expected during
H1FY12.
􀁑 Hyderabad cluster can grow EBITDA at above company average growth
rate, driven by improvements in ARPOB and EBITDA margins, as well as
occupancy. We have been pointing out upside in Hyderabad cluster.
􀁑 ROICs in standalone hospitals are attractive. We have published a note on
June 3, 2011 with analysis of Apollo Hospitals ROIC.
􀁑 Funding - Apollo Hospitals needs Rs9bn over next two years to fund
expansion. It plans to raise Rs3bn through debt, Rs3bn as equity and Rs3bn
through internal accruals.

UBS:: Apollo Hospitals’ returns are attractive; Rs650 price target

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UBS Investment Research
Apollo Hospitals Enterprise
A pollo Hospitals’ returns are attractive
􀂄 Event: We analysed standalone ROIC of Apollo Hospitals (APLH)
We analysed APLH’s returns on its standalone business over the past 10 years. Our
analysis suggested that APLH generates attractive EBIT ROIC and re-confirmed
our belief that APLH will create shareholder value through new hospitals.
􀂄 Impact: Reaffirms our view that APLH will grow profitably
Our analysis indicated that during the low growth phase, APLH’s ROIC increased
from 19% in FY02 to 28% in FY05. During the high growth phase, it declined
from FY05 to FY10; however, as bed growth slows going forward, the ROIC will
continue to increase.
􀂄 Action: Reiterate Buy rating and Rs650 price target
We believe APLH will continue to deliver 20%+ EBITDA and EBIT growth over
the medium-long term and provide attractive investment opportunity to investors to
invest in a secular growth story in the Indian healthcare space. We retain our Buy
rating and Rs650 price target on APLH.
􀂄 Valuation: sum of the parts
We base our price target on our sum-of-the-parts valuation methodology, valuing
the consolidated entity (Rs625/share) on DCF. We explicitly forecast long-term
valuation drivers using UBS’s VCAM tool (assuming an 11.85% WACC). At our
price target, Apollo Hospitals would trade at 13.3x FY13E EV/EBITDA

UBS: Apollo Hospitals Enterprise Expect consensus upgrade; target Rs625

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UBS Investment Research
Apollo Hospitals Enterprise
E xpect consensus upgrade
􀂄 We expect consensus upgrade post Apollo Hospitals’ results
Apollo Hospitals reported EBITDA of Rs3.2bn in 9MFY11 compared to consensus
estimates of Rs4.02bn. Historically, Apollo Hospitals has achieved 71% of annual
EBITDA during first 9M of FY. We estimate analyst upgrades for FY12 onwards.
We are increasing our FY11 EBITDA estimate by 8% to Rs4.19bn.

Hospitals 􀂃 : Q4FY11 Result Preview: ICICI Securities

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Hospitals
􀂃 Hospital revenues to grow 24.4% YoY
We expect revenues of our I-direct hospital universe to increase by
24.4% YoY on the back of robust revenue growth by Apollo
Hospitals. Overall, we expect in-patient volumes and average
revenue per bed (ARPOB) to grow 13% and 8% YoY, respectively,
for the quarter.
􀂃 Operating margins to remain stable
Operating margins of the I-direct hospital universe are likely to
improve by 150 bps to 15.1%. Operating margins of Apollo Hospital
are likely to improve by 230 bps to 15.3% YoY due to an
improvement in the pharmacy segment. However, QoQ it is
expected to remain flat. The operating margin of Fortis Healthcare is
likely to see a marginal improvement of 60 bps YoY to 14.8% for
Q4FY11E.
􀂃 PAT to grow ~53% YoY with Apollo Hospitals leading the pack
The profitability of the I-direct hospital universe will grow 53.3% on
stable operating margins and better revenue growth. Among the
peer set, we expect Apollo Hospitals to report higher growth in
bottomline compared to last year as its business got impacted by
the Telangana crisis. Fortis is expected to report net profit growth of
38% YoY on healthy revenue growth and stable margins.

Healthcare Q4FY11 Preview: In a healthy state : Centrum,

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In a healthy state
We remain Overweight on the Healthcare sector, given
the demand-supply mismatch, good brand building
exercises by companies and robust long-term growth
potential. We retain our Buy rating on Apollo Hospitals
and a Hold on Fortis Healthcare. We believe both the
companies are well-positioned to capitalise on the
increasing demand for healthcare services, sound
business fundamentals and attractive valuations.
�� Sales growth to continue: We expect Apollo Hospitals
to report 30% YoY sales growth in Q4FY11 to
Rs6,278mn. Fortis Healthcare is expected to notch
higher growth of 21.6% YoY to Rs4,006mn.
�� Margins to improve: We expect the EBITDA margin of
Apollo Hospitals to inch up to 16.3%. We expect Fortis
Healthcare to report an EBITDA margin of 16.7%, up
220bp QoQ. In Q3FY11 Fortis had some one time
expenses related to the opening of the Shalimar Bagh
hospital in Delhi. The improvement would primarily be
driven by cost efficiencies and improving operating
leverage.
�� Profitability to grow: We expect Apollo Hospitals’ PAT
to grow by a healthy 55% YoY to Rs500mn and Fortis to
register 34% YoY increase to Rs 366mn.
�� Key points to watch: For Apollo Hospitals, the key
thing to watch out for will be EBIT margins of the
pharmacy segment. After reporting +ve EBIT margins in
Q2FY11 (0.3%), the company once again showed –ve
EBIT margins of 0.5% in Q3FY11. We believe the
company would achieve PAT breakeven by FY12. We
believe the operating performance of pharmacy
vertical would be a key factor in improving the overall
margins. According the last analyst’s presentation on
Fortis, the opening of its 900 bed green-field facility in
Gurgaon (phase 1 450 beds) was delayed by one
quarter to Q2FY12. Any further delay would impact our
estimates.
�� Valuations: We value Apollo Hospitals at 14x FY13E
EV/EBITDA to arrive at a price target of Rs653. We value
Fortis Healthcare at 15x FY13E EV/EBITDA to arrive at a
price target of Rs175.