Apollo Hospitals hospital growth and HealthCo restructuring strengthen FY27 earnings outlook

Investment View and Target Price

Prabhudas Lilladher retained its BUY rating on Apollo Hospitals Enterprise following the August 14, 2026 Q1 FY27 result update and raised its target price to Rs 10,000 from Rs 9,350.

The broker views the stake sale in Apollo HealthCo to Advent and the proposed merger with Keimed as positive steps towards creating an integrated pharmacy and digital-health platform. Apollo HealthCo is scaling up, while the digital business is expected to reach EBITDA breakeven in the coming quarters. The planned demerger of the omnichannel pharmacy business, 24x7 and telehealth into a separately listed entity is intended to unlock value through a more focused, consumer-oriented pharmacy and digital-health platform.

Strong Q1 FY27 Financial Performance

Apollo Hospitals reported a strong Q1 FY27, with consolidated revenue rising 21 per cent year on year to Rs 70,435 million, which was 3 per cent above Prabhudas Lilladher's estimate. EBITDA increased 28 per cent year on year to Rs 10,921 million, a 4 per cent beat, while EBITDA margin expanded by 90 basis points year on year to 15.5 per cent. Adjusted PAT rose 34 per cent year on year to Rs 5,807 million, 5 per cent above the broker's estimate.

After adjusting for 24x7 losses and ESOP costs of around Rs 910 million, EBITDA stood at Rs 11,800 million, up 22 per cent year on year. Net debt declined by Rs 1,200 million sequentially to Rs 7,500 million.

Hospital Segment Remains the Principal Growth Driver

The hospital segment was the principal operating driver. Hospital revenue grew 22 per cent year on year, while hospital EBITDA increased 20 per cent to Rs 8,600 million despite Rs 380 million of losses from new units. Excluding these new-unit losses, hospital EBITDA growth was 25 per cent and the adjusted operating margin exceeded 25.9 per cent.

The 380 beds operationalised during the period contributed Rs 920 million of Q1 FY27 revenue. Established units achieved 18 per cent growth, driven by 11 per cent volume growth, 4 per cent pricing and 3 per cent case and payor mix. Inpatient volumes grew 13 per cent, while occupancy rose 500 basis points year on year to 70 per cent.

Average revenue per occupied bed increased 8 per cent to around Rs 1.87 lakh, supported by higher clinical complexity rather than tariffs. Average length of stay improved to 3.09 days from 3.14 days. Insurance and self-pay represented 83 per cent of inpatient revenue, while CONGO specialties contributed 62-63 per cent of inpatient revenue.

Apollo HealthCo and Allied Businesses

Apollo HealthCo revenue grew 20 per cent year on year to Rs 29,770 million, while EBITDA rose to Rs 1,700 million from Rs 940 million in Q1 FY26. Platform GMV increased 23 per cent to Rs 5,350 million despite the exit from an unprofitable corporate partnership.

Digital cash losses narrowed to Rs 100 million from Rs 490 million year on year. However, 24x7 digital-app expenses increased by around Rs 79 million sequentially to Rs 811 million. Pharmacy operating margin, adjusted for 24x7, remained broadly flat both year on year and sequentially at 8.8 per cent.

AHLL EBITDA rose 46 per cent year on year to Rs 590 million, with operating margin expanding 250 basis points to 11.8 per cent, led by diagnostics.

Management Guidance and Growth Outlook

Management guided for around 20 per cent hospital revenue growth in FY27, comprising 13-14 per cent growth from established hospitals and around 7 per cent from new units over the next 24 months. Established-unit margin is expected to remain above 26 per cent in FY27.

• Pharmacy growth is expected to be around 25-30 per cent.
• Diagnostics growth is expected to be around 27 per cent, with diagnostic-business margin of around 20 per cent over the next 6-8 quarters.
• The merged pharmacy entity is guided to an EBITDA exit run-rate of Rs 16,500-17,500 million by Q4 FY27.
• The insurance business is expected to reach breakeven by the end of Q3 FY27, with steady-state quarterly costs of around Rs 800 million.
• Bangladesh volumes have recovered to around 60-70 per cent of earlier peak levels. Realisations remain slightly better due to higher case complexity.

Estimates and Valuation

Prabhudas Lilladher estimates a 25 per cent EBITDA CAGR for Apollo Hospitals over FY26-FY28E. The broker raised its FY27E sales estimate by 1.3 per cent to Rs 296,663 million, while FY27E EBITDA and EPS estimates were broadly unchanged at Rs 48,108 million and Rs 180.9, respectively. FY28E EBITDA and EPS estimates were reduced marginally by 0.8 per cent and 0.9 per cent, respectively.

The target price of Rs 10,000 values the hospital business at 27 times EV/EBITDA, offline pharmacy at 25 times and AHLL at 20 times.

Key Execution Sensitivities

The report identifies the following key execution sensitivities:

• Losses at newly operationalised hospital units.
• Continuing 24x7 digital costs until breakeven.
• Recovery in Bangladesh volumes.
• Regulatory approvals required for the proposed restructuring and demerger.