Apollo Hospitals gains from HealthCo scale, digital breakeven and hospital margins

Investment View and Target Price

Prabhudas Lilladher’s November 6, 2026 Q2FY27 result update on Apollo Hospitals Enterprise maintains a BUY rating and raises the target price to Rs 10,500 from Rs 10,000.

The broker views the stake sale in Apollo HealthCo to Advent and the proposed Keimed merger positively, as these initiatives advance an integrated pharmacy and digital-health platform. Apollo HealthCo is scaling up, while the digital business achieved cash breakeven in Q2FY27.

Management has also announced the demerger of the omnichannel pharmacy business, 24x7, and telehealth business into a separately listed entity. The objective is to create a focused, consumer-facing pharmacy and digital healthcare platform.

Q2FY27 Consolidated Performance

H1FY27 EBITDA was Rs 22,678 million, up 27.7% YoY, with a 15.6% margin. Net debt declined by Rs 1,200 million QoQ to Rs 6,300 million.

Hospital Business Performance

Hospital EBITDA grew 20% YoY to Rs 9,400 million despite losses of about Rs 350 million from new hospitals, compared with Rs 375 million in Q1FY27. Excluding new-unit losses, hospital EBITDA growth was about 25% YoY and the adjusted hospital EBITDA margin was 25.8%.

Established hospitals delivered a 25.8% EBITDA margin, up 61 basis points YoY. Hospital occupancy improved 400 basis points YoY to 73%, while average revenue per patient rose 8% YoY to about Rs 186,800. Average length of stay improved to 3.07 days from 3.14 days.

Insurance and self-pay contributed 82% of inpatient revenue. CONGO-T specialties grew 22% YoY and contributed 61% of inpatient revenue. International patient services grew 35–36% YoY, aided by the recovery in Bangladesh volumes and growth from African and developed markets.

Apollo HealthCo and AHLL Performance

Apollo HealthCo revenue increased 23% YoY to Rs 32,900 million, while EBITDA grew 75% to Rs 1,900 million. Its digital business generated a Rs 10 million profit in Q2FY27 compared with a Rs 390 million loss in Q2FY26.

Management aims to increase daily pharmacy orders by 20–30% over the next six months to improve unit economics. AHLL revenue rose 20% YoY, while its EBITDA margin improved to 13.5%, supported by diagnostics growth and cross-selling to pharmacy customers.

Management Outlook and Guidance

Management reduced FY27 exit EBITDA guidance for the integrated HealthCo business to Rs 15,000 million by Q4FY27 from Rs 16,500–17,500 million.

FY27 margins are expected to be affected by manpower investments, employee bonuses and one-time integration costs, with improvement expected from FY28. Management’s initiatives include scaling Apollo HealthCo and integrating the pharmacy and digital-health businesses through the proposed transactions and demerger.

Estimates, Valuation and Key Risks

Prabhudas Lilladher increased its FY28E and FY29E EBITDA estimates by about 1–2% and forecasts a 24% EBITDA CAGR over FY26–29E. Its valuation uses 25 times September FY28E EV/EBITDA for hospitals and offline pharmacy, and 20 times for AHLL.

• The insurance business remains EBITDA-negative.
• Oncology medicine price caps may affect pharmacy and distribution margins.
• FY27 margins may be pressured by manpower investments, employee bonuses and one-time integration costs.