Apollo Hospitals broad-based Q4 beat supported by hospital growth and Healthco margin gains

Investment View and Earnings Estimate Changes

Motilal Oswal Financial Services reiterates its Buy recommendation on Apollo Hospitals after a broad-based 4QFY26 operating and earnings beat. The broker believes the investment case is supported by healthy hospital volume and realisation growth, sustained hospital margins despite losses from new facilities, improving Healthco profitability, and diagnostic-led momentum at Apollo Health and Lifestyle Ltd. (AHLL).

Motilal Oswal has raised its FY27E and FY28E earnings estimates by 4 per cent and 6 per cent, respectively. The revisions reflect better realisation per patient in healthcare services, an improved case mix, a quicker reduction in Healthco operating losses and the scaling of diagnostics. The broker values Apollo Hospitals at a target price of Rs 9,590.

4QFY26 Financial Performance

For FY26, reported revenue, EBITDA and adjusted profit after tax grew by 16 per cent, 25 per cent and 35 per cent year on year to Rs 25,230 crore, Rs 3,770 crore and Rs 1,956 crore, respectively.

Hospital Business: Volume Growth and Capacity Expansion

The hospital business represented 49 per cent of sales and delivered 4QFY26 revenue growth of 15.8 per cent year on year to Rs 3,268 crore. Growth was driven by 7 per cent inpatient-volume growth, 4 per cent pricing growth and a 5 per cent improvement in case mix.

Hospital EBITDA rose 14 per cent year on year to Rs 780 crore, while the EBITDA margin stood at 23.9 per cent despite operating losses from newer hospitals. Occupancy improved to 68 per cent from 67 per cent a year earlier. Average revenue per inpatient increased 9 per cent to Rs 1,87,208, while inpatient average length of stay declined 3 per cent to 3.19 days.

Management operationalised 185 beds in 4QFY26 and expects to operationalise another 550 to 600 beds in the first half of FY27. A further 1,400 operating beds could be added over the next 12 to 15 months, representing a 25 per cent capacity addition. Management retained its guidance for Rs 150 crore of operating losses from new hospitals in FY27.

Healthco: Improving Profitability and Demerger Plans

Healthco, comprising offline and online pharmacy operations and Apollo 24/7, contributed 43 per cent of sales. Its revenue grew 20 per cent year on year to Rs 2,848 crore in 4QFY26, while EBITDA improved to Rs 160 crore from Rs 36 crore a year earlier. The EBITDA margin was 5.5 per cent.

Platform GMV grew 20 per cent year on year to Rs 530 crore. Apollo added 176 stores during the quarter, taking the store base to 7,289. The average daily order run-rate across pharmacy and diagnostic consultations, including inpatient and outpatient referrals, increased 10 per cent to 69,000. Online-pharmacy transactions grew 15 per cent year on year, while the company continued to rationalise operating costs.

Offline pharmacy EBITDA grew 21 per cent year on year, supported by a steady 7.7 per cent margin. Management expects Healthco to become cash break-even in 1QFY27 and to complete its demerger by 4QFY27. It also guided for Rs 50 crore of Apollo 24/7 ESOP costs in FY27.

AHLL: Diagnostic-Led Growth

AHLL revenue increased 24.1 per cent year on year to Rs 489 crore in 4QFY26, while EBITDA rose 59 per cent to Rs 75 crore. For FY26, AHLL revenue increased 20.1 per cent to Rs 1,865 crore, led by 41 per cent diagnostic revenue growth.

Diagnostic collection centres increased 13 per cent year on year to 2,387, and daily footfalls rose 60 per cent to 23,908. However, gross realisation per patient declined 4 per cent to Rs 787. Motilal Oswal forecasts AHLL sales to grow at a 16.5 per cent CAGR over FY26 to FY28, reaching Rs 2,650 crore.

Valuation and Factors to Monitor

Motilal Oswal uses a sum-of-the-parts valuation for Apollo Hospitals:

This sum-of-the-parts approach produces a target price of Rs 9,590. Factors to monitor include the stated losses from new hospitals, the pace of Healthco loss reduction and demerger execution, diagnostic realisation trends, and the ability to sustain margins while expanding beds and stores.