Apollo Hospitals Enterprise Ltd- Will it be able to keep up its growth?

 Apollo Hospitals have the largest chain of healthcare facilities in India with 71 hospitals.

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(A) About

Apollo Hospitals - logo

Apollo Hospitals was established in 1983 by Dr. Prathap C. Reddy, re-owned architect of modern healthcare in India. As the nation’s first corporate hospital, it is acclaimed for pioneering the private healthcare revolution in the country.

It is one of the leading integrated healthcare service providers in Asia. Moreover, it is present in healthcare facilities like hospitals, pharmacies, primary care offices, and diagnostic centers. It further offers health insurance services, global projects consultancy, nursing and hospital management colleges, a research foundation, epidemiological studies, stem cell & genetic research, and telemedicine facilities in 10 different countries.

(B) Journey

Apollo Hospitals - Journey

(C) Shareholding Pattern

Apollo Hospitals - Shareholding Pattern
Apollo Hospitals - Promoters
Apollo Hospitals - Shareholding Other

(D) About the Executive Management

(i) Dr. Prathap C Reddy- Founder and Executive Chairman

Dr. Prathap C Reddy is the visionary Founder Chairman of Apollo Hospitals. Bachelor’s Degree in Medical and Surgery from Stanley Medical College, Chennai and also a Fellow of the Royal College of Surgeons, Edinburgh. Moreover he has over 50 years experience in the Healthcare Industry.

Dr. Prathap C Reddy was awarded the ‘Padma Vibhushan’, the second highest civilian award by the Government of India, an acknowledgement of his untiring pursuit of excellence in healthcare.

Mr. Prathap C Reddy received Rs 16.7 cr as remuneration for FY22, i.e., 0.11% of Net Sales and 1.51% of Net Profit.

(ii) Smt. Preetha Reddy- Executive Vice Chairperson

Preetha Reddy is the Executive Vice Chairperson of Apollo Hospitals and the daughter of Prathap C Reddy.

Further, she got her Bachelor of Science degree in Chemistry from Madras University and master’s degree in Public Administration from Annamalai University. She is widely recognized for her contributions in making high quality healthcare accessible to millions and also for her support to various entities and industry bodies, working for the betterment of India.

Ms. Preetha Reddy received Rs 5.97 cr as remuneration for FY22, i.e., 0.04% of Net Sales and 0.54% of Net Profit.

(iii) Smt. Suneeta Reddy- Managing Director

Suneeta Reddy is the Managing Director of Apollo Hospitals, Asia’s foremost and trusted healthcare provider and the daughter of Prathap C Reddy. A member of the founding family, Suneeta Reddy started working with Apollo Hospitals in 1989.

She has done her Bachelor of Arts degree in Public Relations, Economics and Marketing from Stella Maris College and also has done President management program from Harvard Business School.

Ms. Suneeta Reddy received Rs 5.96 cr as remuneration for FY22, i.e., 0.04% of Net Sales and 0.54% of Net Profit.

(iv) Smt. Shobana Kamineni- Executive Vice Chairperson

Ms. Shobana Kamineni is the Executive Vice Chairperson of Apollo Hospitals Enterprise Limited and the daughter of Prathap C Reddy.

She has done her Bachelor of Arts degree Economics Hospital Administration Diploma from Columbia University, New York and also has done Bachelor’s Degree Economics from Stella Maris College.

Ms. Shobana Kamineni received Rs 5.99 cr as remuneration for FY22, i.e., 0.04% of Net Sales and 0.54% of Net Profit.

(v) Smt. Sangita Reddy- Joint Managing Director

Sangita Reddy is Joint Managing Director of Apollo Hospitals Enterprises and the president of Federation of Indian Chambers of Commerce & Industry (FICCI) and also the daughter of Prathap C Reddy.

Graduate in Science from the Women’s Christian College in Chennai, India, Dr. Sangita Reddy has pursued post-graduation courses in Hospital Administration from Rutgers University, Harvard University and also the National University of Singapore.

Ms. Sangita Reddy received Rs 5.94 cr as remuneration for FY22, i.e., 0.04% of Net Sales and 0.54% of Net Profit.

(E) Business Segment

Apollo Hospitals - Segment

(i) Healthcare Services

Apollo Hospitals - Healthcare Services

Apollo hospitals is India’s leading hospital chain with 71 owned and operated hospitals, 9000+ bed capacity and 7,800+ operating beds. Further, with hospitals across the country, mainly in the metros and large cities, AHEL has established itself as a leading name in quality care. It has also established a presence in southern India with 4,300+ operating beds in this region.

(ii) Pharmacy Distribution

Apollo Hospitals - Pharmacy Distribution

Apollo’s digital health platform’s flagship offering, its e-pharmacy, has deep roots due to a 4,529 strong physical store presence, driving not just a wider reach for the company than pure online pharmacies, but also enabling an industry-leading delivery time of two hours. It has also an efficient distribution business in place that supplies exclusively to all its pharmacies.

With the support of quick delivery times made possible by its omni-channel approach, Apollo can further meet the needs of a large population in need of pharmaceuticals for urgent treatment, something that pure online pharmacies have been unable to do.

(iii) Apollo Health & Life Style

Apollo Hospitals - Apollo Health & Life Style

Apollo has also developed key adjacencies in servicing patients’ needs across the care continuum and specialties. Apollo also focuses on the retail healthcare segment, providing specialized healthcare services in a cost-effective manner. After the first clinic in 2002, Apollo has also expanded to add other specialized retail care services like sugar clinics, dialysis centers, diagnostics, etc.

(F) Revenue Segment

Apollo Hospitals - Revenue Segment

Company’s Healthcare services revenue is growing at a CAGR of 14%, Pharmacy distribution is growing at 14% CAGR while Apollo Health & Life Style is growing at 28% CAGR over FY17-FY22.

(G) Operating Parameters of Apollo Hospital

Apollo Hospitals - ARPOS (Average revenue Per Occupied Bed)
Apollo Hospitals - ALOS (Average Length of Stay)

(H) Peer Comparison

Apollo Hospitals - Peer Comparision

(I) Cost Structure of Apollo Hospital

Apollo Hospital - Cost Structure
Apollo Hospital - Cost of Raw Material

(J) Financial Parameters

Apollo Hospital - Financial Trend

Company’s revenue has increased at a CAGR of 14.55% while its profit after tax has increased at a CAGR of 14.11% in the past 10 years. Moreover, its ROE & ROCE has also improved significantly from FY13 to FY22.

Meanwhile, the company has also reduced its debt to equity in the past 5 years.

Apollo Hospital- Du pont Analysis

Company is consistently improving its PAT margins in the last 5 years. Moreover, its Assets to equity improved due to reduction of debt to equity.

(K) Management Discussion & Concalls

Outlook

  • Health penetration in India is very low compared to world average.
  • Hospital Industry in India is forecasted to increase to Rs 8.6 Trillion by FY22 from Rs 4 Trillion in FY17 a CGAR growth of 16-17%.
  • Moreover Indian health tourism market is growing at 18%.
  • Cost of surgery in India is about 1/10th of that in the US or Western Europe.
  • Government has undertaken various initiatives like Ayushman Bharat & National Digital Health mission to develop India as global healthcare hub.

Segment Outlook

Healthcare Services-

  • It is growing at a 14% CAGR over FY17-22.
  • During the period, new hospitals witnessed a muted growth of 4% YoY.

Pharmacy Distribution-

  • It is growing at 14% CAGR over FY17-22 mainly due to aggressive store additions of 360+ stores per year.
  • Sales in private label products increased from 6% in FY17 to 11% in FY22.
  • Revenue per store is increasing at 7% CAGR and is now at Rs 1.5 Cr.

Apollo Health & Lifestyle Ltd-

  • This segment is growing at 28% CAGR over FY17-22. It was majorly driven by diagnostics, primary care and specialty care segments.
  • For its diagnostic segment company has more than 1,228 touch points across 160+ cities in 20 states.
  • Meanwhile, it has 468 Primary care stores and 19 Specialty care centers.
  • Company has diagnostic revenue target of Rs 1000 Cr over next 3 years with 15%+ Operating margin.

Q2FY23 Concall

  • Management expects occupancy at group level to improve from 68% to 70% over the next 12 months.
  • Moreover, management guided to improve its EBITDA margin by 100-150 bps over the next 18 months.
  • It is looking to increase its revenue contribution from international patients to 10% in FY23 and 15% in FY24 from the current level of 6%.
  • Moreover it is planning to add ~2000 beds at a cost of Rs 3000 Cr over the next 3-4 years.
  • Management has planned to add 800 pharmacy stores by FY23 with a target to open 6,500 stores by FY25.
  • It has entered into a 10 year commercial agreement with Amazon India which is likely to aid in scaling up its customer base.

(L) Strengths & Weaknesses

Strengths

(i) Dominant position in the healthcare sector

It is the market leader in the private healthcare segment in India. Moreover it operates the largest chain of healthcare facilities, with 71 hospitals (44 owned with capacity of 8,538 beds; 5 managed with 851 beds; and also 22 day-care/Cradle with 522 beds, on March 31,2022). Operating beds are widespread across the country, especially in Tamil Nadu (28%), Andhra Pradesh and Telangana (18%), and Karnataka (10%).

(ii) Robust pharmacy distribution business

Further with its strong distribution network, Apollo is the exclusive supplier for the 4,292 standalone pharmacy stores (SAPs) of Apollo Pharmacy Limited (APL) which are spread across the country and provide geographic diversity to revenue. Furthermore, steady addition of stores have helped the pharmacy business to post a healthy compound annual growth rate (CAGR) of 18% in revenue during fiscals 2015-21.

Weaknesses

(i) Exposure to regulatory risks

Government policy on capping of prices for medical procedures and devices (such as cardiac stents and knee implants) impacted revenue and profitability in fiscals 2017 and 2018. Moreover, any regulatory action and its impact will remain monitorable.

Drop us your query at – info@pawealth.in or Visit pawealth.in

References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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