Apollo Hospitals shares may rally 33% from current levels; Citi cites attractive valuations

Shares of Apollo Hospitals Enterprise Ltd. will react to the company's December quarter results on Wednesday, February 11. Brokerages have largely maintained their positive stance on the stock following the earnings announcement.

Brokerage firm Citi has reiterated a 'Buy' rating on Apollo Hospitals with a price target of ₹9,600 per share.

Citi said the company delivered a strong operational performance, with consolidated Q3 revenue and EBITDA rising 17% and 27% year-on-year to ₹6,500 crore and ₹970 crore, respectively.

The brokerage mentioned that growth was led by the hospitals business, which posted a 15% YoY revenue increase, even as greenfield capacities were added.

Hospital EBITDA margins improved by 60 bps YoY to 24.5%. Performance was further supported by Apollo HealthCo, where a 12% YoY reduction in Apollo 24/7 costs drove a 210 bps expansion in margins.

Citi added that valuations remain attractive, with the stock trading below its historical average.

Morgan Stanley has an 'Overweight' rating on Apollo Hospitals with a price target of ₹8,813.

On the earnings front, Apollo Hospitals reported a strong December quarter. Net profit rose 35% year-on-year to ₹502.3 crore, beating the CNBC-TV18 poll estimate of ₹426.6 crore. Revenue increased 17.2% to ₹6,477 crore, ahead of expectations of ₹6,231.7 crore.

EBITDA grew 26.7% YoY to ₹965 crore, compared with the Street estimate of ₹877.8 crore, while margins expanded to 14.9% versus 13.8% a year ago and above the poll estimate of 14.1%.

Segment-wise, Apollo HealthCo, which includes pharmacy and Apollo 24/7 digital, reported a 20% YoY revenue growth to ₹2,827.4 crore. The segment also posted its lowest-ever digital cash loss of ₹29.2 crore in the quarter.

The healthcare services segment saw Q3 revenue rise 14% YoY to ₹3,183.2 crore, with EBITDA margins improving by 73 bps to 24.8%.

Apollo Health and Lifestyle, which houses retail and diagnostics, reported a 20% YoY increase in revenue to ₹466.8 crore.

Apollo Hospitals will hold its post-earnings conference call at 2 pm today.

Shares of Apollo Hospitals Enterprise settled 0.07% higher on Tuesday at ₹7,216. The stock has gained over 14% over the past 12 months.