Why Apollo Hospital Analysts See Double Figure Upside Even After Q3 Earnings Miss

Analysts at Motilal Oswal Investment Services and ICICI Direct expressed confidence in Apollo Hospitals Enterprises' ability to scale up digital capabilities to widen its reach. 

The Apollo Hospitals Enterprises Analyst: Tushar Manudhane-led analyst team at Motilal Oswal maintained the ‘buy' rating for the stock with an increased target price of ₹5,700 from ₹5,600 earlier. 

Analysts at ICICI Direct led by Siddhant Khandekar also maintained their ‘buy' rating with a price target of ₹5,460, an around 18% upside from the stock's last closing price of ₹4,644.35. 

The Apollo Hospitals Enterprises Thesis: ICICI Direct noted that while the company's revenues were in line but its margins missed estimates. Analysts at Motilal Oswal also said that the company's net profit of around ₹160 crore missed their estimate of ₹200. 

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Motilal Oswal noted that the decline in profits was in part a result of the increase in expenses such as employee costs. ICICI Direct highlighted that the growth in the pharmacy segment was nullified by negative growth in healthcare. 

Analysts at ICICI Direct said that the company is looking to create an omnichannel healthcare platform that can help it tap new-age investors enabling rapid scale-up of the digital healthcare platform. Motilal Oswal also noted that in order to keep up with the changing consumer preferences, the company looks to build and leverage the overall Apollo Group's digital capabilities. 

Going forward ICICI Direct analysts also see the healthcare business continuing towards normalisation with the lifting of travel restrictions that will result in more international patients.

Motilia Oswals also expects Diagnostics/Primary/Secondary Care segments to see improved footfall given the strong brand franchise and expansion in the number of centres. 

However to account for lower profitability in the Apollo Health and Lifestyle Limited segment and higher finance expenses the brokerage firm lowered the earnings estimate by 5%/5%/2% for FY23/FY24/FY25.

Price Action: Shares of Apollo Hospitals Enterprises were down 0.89% to trade at ₹4,602.95 in the early hours of trading on Friday. 

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Posted In: Apollo HospitalshealthcareHealthcare SectorICICI SecuritiesMotilal Oswal Financial ServicespharmaQ3FY23