Apollo Hospitals' Q2 EBITDA Soars To Rs. 6.3 Billion, Propelling Rs. 34 Billion Expansion Plan For FY25

Apollo Hospitals Enterprises (APHS) aims to achieve a 72 per cent occupancy rate and a 200 basis points margin increase in the hospital segment by FY25 plans and add 2,300 census beds over the next three years, backed by a capital expenditure plan of Rs. 34 billion, the company informed in a press statement on Monday.

The latest financial report reveals that APHS reported consolidated Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of Rs 6.3 billion, marking a significant 23 per cent quarter-on-quarter increase and surpassing estimates by 6 per cent. Adjusted for 24x7 losses and Employee Stock Ownership Plan (ESOP) costs (Rs 2 billion), the EBITDA stood at Rs 8.3 billion, reflecting an 11 per cent year-on-year growth, the company said in its statement.

The FY24 and FY25 EBITDA, excluding 24x7, are expected to remain largely unchanged, with an estimated 15 per cent EBITDA Compound Annual Growth Rate (CAGR) over FY23-26 (excluding 24x7). The recommendation is to 'BUY,' with a revised target price of Rs. 6,000 per share.

Apollo Hospitals Enterprise allocated Rs 1.6 billion to 24x7 digital app expenses, with an additional Rs 351 million in ESOP-related non-cash expenses in Q2. The adjusted pharmacy Operating Profit Margin (OPM) declined 30 basis points year-on-year, standing at 7.6 per cent, the company added. 

The overall hospital EBITDA, including proton, increased by 11 per cent year-on-year and 17 per cent quarter-on-quarter, with an Operating Profit Margin decline of approximately 30 basis points year-on-year to 24.9 per cent. This dip was attributed to increased investments in clinical talents and marketing expenses, as per the company's statement.

Apollo Health and Lifestyle Limited (AHLL) reported an EBITDA of Rs. 318 million, a 37 per cent quarter-on-quarter increase, with a 9 per cent OPM. Year-on-year EBITDA growth was subdued at 16 per cent, primarily due to ongoing network expansions and the relocation of two spectra units.

The overall occupancy rate experienced a seasonal increase, reaching 68 per cent compared to 62 per cent in Q1. Average Revenue Per Occupied Bed (ARPOB) remained flat quarter-on-quarter, but exhibited a 14 per cent year-on-year improvement, reaching Rs. 57.4K. International business contributed to 7.5 per cent of total revenues, with net debt remaining steady at Rs. 15.2 billion.

Key takeaways from the conference call include the acquisition of approximately 100 new doctors across cities, a strategic move expected to increase occupancy and expand margins by 200 basis points by the end of FY25. Additionally, the management outlined plans for a total bed addition of 2,300 census beds over three years, involving a capex of Rs. 34 billion across eight cities. Operationalising a 250-bed hospital in Pune (expandable to 425 beds) with a Rs. 6.8 billion capex in Q1FY25 and a similar plan for 225 beds in Kolkata in Q4FY25, the statement from the company highlighted.

The payor mix, a critical aspect of the company's financial structure, revealed that self-pay and insurance contribute 38 per cent and 43 per cent, the company stated.