Apollo Hospitals gains 2% on hopes of strong Q4 earnings

Shares of Apollo Hospitals Enterprise rose 2 percent in early trade on May 30 as investors bet on hopes of a robust earnings show from the healthcare services major. The company is set to release its fourth-quarter numbers later today.

At 11.56 am, shares of Apollo Hospitals were trading at Rs 4,697.11 on the NSE, up 1.11 percent from the previous close. Volumes were also high as six lakh shares changed hands on the exchanges, as against the one-month daily traded average of three lakh shares.

According to analysts on the Street, the company’s net profit is likely to come around Rs 198 crore in Q4, reflecting an over two-fold percent jump from Rs 93.99  crore clocked in the corresponding quarter last year. The rise in net profit for the quarter under review will be aided by a favourable base and strong seasonality.

Further, cost optimisation from newer hospitals, and better occupancy is expected to aid revenue growth. “We expect hospital occupancy to move up sequentially as Q3 was affected by the holiday season,” brokerage firm Jefferies stated in its report.

Likewise, the topline is expected to record a 21.3 percent on year rise to Rs 4,302.7 crore as against Rs 3,546.43 crore in the preceding fiscal.

Jefferies also believes that Apollo Hospitals may benefit from lower loses in its HealthCo division as revenue continue to ramp up and investments peak out. Nonetheless, expenses are likely to remain higher for the company’s 24*7 arm on a year-on-year basis, which will put pressure on its operational performance.

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Accordingly, EBITDA ( Earnings before interest, taxes, depreciation, and amortization) margin is likely to contract 110 basis points on year to 12 percent for the fourth quarter.

In the December quarter, Apollo HealthCo recorded a net loss of Rs 63 crore, while the costs associated with Apollo 24/7 amounted to Rs 202.4 crore. However, the management had guided that losses in its HealthCo arm had peaked in the December quarter and would move towards recovery, with a breakeven expected in the second half of FY24.

The company had also guided that it will fund the losses at Apollo HealthCo from internal accruals over the next six months, which means the operating margin may remain flat sequentially but the contract on a year-on-year basis.

Going ahead, analysts at Prabhudas Liladher believe the management’s commentary on 24×7 losses and outlook for the hospital segment will remain key monitorable for Apollo Hospitals.

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