Apollo Hospitals Drives Margin Growth Through Expansion and HealthCo Value Unlocking

Investment View and Valuation

ICICI Securities retained its BUY rating on Apollo Hospitals in its May 22, 2026 result update, supported by broad-based Q4 FY26 growth, continuing margin expansion, hospital capacity additions and potential value unlocking at Apollo HealthCo. The broker values Apollo Hospitals at Rs 9,660 per share using a sum-of-the-parts valuation, compared with a CMP of Rs 8,300.

Apollo is characterised as an integrated healthcare provider with around 10,970 beds across 49 owned hospitals and six managed hospitals. Apollo HealthCo has around 7,289 offline pharmacies, while Apollo 24/7 has more than 4.7 crore registered users.

Q4 FY26 Financial Performance

Apollo Hospitals reported Q4 FY26 revenue growth of around 18 per cent year-on-year to Rs 6,605.5 crore. EBITDA increased 31.3 per cent to Rs 1,011 crore, while EBITDA margin expanded by 154 basis points to 15.3 per cent.

ICICI Securities attributed the margin improvement principally to stronger profitability at AHLL, comprising diagnostics and retail healthcare, and at HealthCo’s pharmacy operations, despite losses from new hospitals.

Hospital Services: Volume Growth and Capacity Expansion

The hospital services business recorded revenue growth of around 16 per cent year-on-year to Rs 3,268 crore. Growth was driven by 7 per cent inpatient-volume growth, a 5 per cent improvement in case mix and 4 per cent pricing growth. Key specialties, including cardiac, oncology, neuro, gastro and ortho, grew 22 per cent year-on-year.

Group occupancy was 68 per cent, including 71 per cent in metro hospitals and 69 per cent in established hospitals. Average revenue per patient rose 9 per cent year-on-year to Rs 1,87,208. Hospital-services EBITDA was Rs 781 crore, representing a 23.9 per cent margin, and hospital-business ROCE was 25.4 per cent in FY26. International patient traffic, especially from Bangladesh, was softer, although overall growth remained strong.

Management commissioned four new hospitals with potential capacity of 855 beds, of which 185 beds were operational. Sarjapur and Gurgaon hospitals are expected over the following two quarters, and management expressed confidence in sustaining hospital growth into FY27.

Apollo Hospitals has a planned four-year expansion programme to add 3,415 beds across India, involving more than Rs 5,100 crore of expenditure, of which Rs 3,200 crore had already been incurred. ICICI Securities sees cost reduction, a growing mix of complex procedures and improved profitability at new hospitals as key focus areas.

Apollo HealthCo: Growth and Value-Unlocking Potential

Apollo HealthCo revenue increased around 20 per cent year-on-year to Rs 2,848 crore in Q4 FY26. Offline pharmacy distribution grew 21 per cent to Rs 2,518 crore, while online pharmacy distribution and Apollo 24/7 grew around 13 per cent to Rs 330 crore.

HealthCo opened 663 net new stores in FY26 and plans to add 600 offline stores annually. Q4 HealthCo EBITDA increased to Rs 156 crore from Rs 36 crore a year earlier, while pharmacy-distribution EBITDA was Rs 195 crore, up 20 per cent year-on-year.

Apollo 24/7 GMV rose 20 per cent to Rs 528 crore, while digital revenue increased 29 per cent on a like-for-like basis after excluding the closed Amazon corporate partnership. Management views digital break-even as an important EBITDA inflection point, targets a HealthCo demerger in Q4 FY27 and has articulated pro-forma HealthCo revenue of around Rs 25,000 crore by listing.

Integration of Keimed Private Limited and a subsequent HealthCo listing are important value-unlocking milestones.

AHLL and Strategic Business Transactions

AHLL revenue rose 24 per cent year-on-year to Rs 489 crore, driven by 52 per cent diagnostics growth. AHLL EBITDA grew 58 per cent to Rs 75 crore and margin improved to 15.3 per cent from 12 per cent.

Apollo sold its mother-and-child and fertility businesses, Cradle and Fertility, to Cloudnine Hospitals while retaining 9.9 per cent. The transaction valued the business at Rs 1,550 crore, or around 35 times EBITDA, and was expected to close around Q2 FY27 subject to approvals.

These businesses generated FY26 revenue of Rs 450 crore and adjusted EBITDA of Rs 45 crore. Spectra and other AHLL assets remain with Apollo.

FY27E–FY28E Financial Forecasts

Key Risks

• Cost overruns at newly commissioned or greenfield hospitals.
• Multiple execution variables associated with Apollo HealthCo’s growth and profitability.