Apollo Hospitals Reports A Healthy Performance

Healthcare major, Apollo Hospitals Enterprise has come out with fantastic earnings for the third quarter (Q3FY13) of the current fiscal. The company has reported a 20% growth in its topline to Rs 856 crore. Thanks to the improved margins and lower tax, its net profit came in 25% higher, to Rs 81 crore.

The company has also seen a continued momentum in its hospitals’ business in which it has reported a 15% growth. The PBIT margins of this business have improved by about 69 basis points. Sequentially too, the margins are higher, and at 20.06%, being the highest in the last eight quarters. This segment contributes 65% to Apollo’s total revenues and hence, the margins expansion of this business has been a major positive to the company.

Its pharmacy business also performed well in the quarter. A year before, this business contributed about 31% to Apollo's topline. The contribution has, however, gone up to 33.63% during this quarter. Its contribution is the highest and has been consistently showing a strong performance on a QoQ basis in the last two years. The Pharmacy business has reported a 29% rise in revenues to Rs 290 crore on a YoY basis. The margins of this business too increased by 91 basis points YoY to 1.88%.

The improvement of margins in both the business segments is positive as the overall EBITDA margins of the company have expanded. The EBITDA margins at 17.11% are up by 11 basis points on a YoY basis.

Finance expenses during the quarter increased by 23% to Rs 19 crore. It however has a very strong interest cover ratio (6x), indicating comfort in the debt servicing. As per its half-yearly balance sheet, its debt to equity ratio is comfortable at 0.32x. Tax rate at 25% was lower sequentially as well as on a YoY basis.

The company has recently said that it will sell its Apollo Health Street Service business to Sutherland Global Services. The transaction is expected to take place in February 2013 and other details are not available currently. It has also spoken about setting up a Proton Therapy center for cancer treatment, which will be a first of its kind in South East Asia.

After the results, the stock rose by 3% to Rs 846 on the BSE. It has outperformed the broader market by gaining more than 40% in the last six months. Considering the strong business performance in the December quarter, we would suggest our readers to enter the counter. We expect the stock to give about 15-20% returns in the next one year.