Apollo Hospital’s revenue in Q2FY19 grew by 15.3% yoy to Rs2,090cr due to double digit growth in the hospital and pharmacy revenues. EBITDA grew by 16.6% yoy to Rs257.8cr in Q2FY19 vs. Rs221.1cr in Q2FY18. EBITDA margins stood at 12.3% in Q2FY19 vs. 12.2% in Q2FY18 and 11.9% in Q1FY19. This was due to the margin improvement in both hospital and pharmacy segments. PAT grew by 11.4% yoy to Rs79cr in Q2FY19 vs. Rs70.9cr in Q2FY18. We had expected revenue/EBITDA/PAT of Rs2,174.2cr/Rs253.4cr/Rs77.6cr respectively in Q2FY19. Apollo’s Q2FY19 revenue has come 3.9% below our expectations, however EBITDA and PAT were slightly ahead of our estimates. Overall, due to improvement in the operating performance, Apollo's Q2FY19 performance is slighly above our estimates.
Hospital segment revenue grew by 11.4% yoy to Rs1,126.6cr in Q2FY19. On qoq basis, hospital segment revenue grew by 11%.
EBIT of the hospital segment grew by 12.2% yoy to Rs141.9cr. EBIT margin stood at 12.6% in Q2FY19 vs. 12.5% in Q2FY18 and 11.9% in Q1FY19.
Revenue from the pharmacy segment grew by 20.2% yoy to Rs963.7cr in Q2FY19. For the past three quarters, pharmacy segment has clocked 20% yoy growth rate.
Pharmacy segment EBIT grew by 49.2% yoy to Rs42cr in Q2FY19 vs. Rs28.2cr in Q2FY18. EBIT margins in Q2FY19 stood at 4.4% vs. 3.5% in Q2FY18.
Overall hospitals contributed 54% and pharmacies contributed 46% in Q2FY19 revenue.
At 12.3%, Apollo’s EBITDA margins are highest since Q2FY17 (13.6%). Margins improved in Q2FY19 due to slower growth in the employee cost.
Overall hospital occupancy during H1FY19 stood at 67% vs. 65% for H1FY18.
Occupancy of the old hospitals is at 72%, while at the new hospitals is at 64%.
Karnataka region occupancy dropped from 74% in H1FY18 to 69% in H1FY19 due to opening of the new hospital.
Hospital business EBITDA margin were at 18.4% in Q2FY19 vs. 18.3% in Q2FY18.
Navi Mumbai hospital reported EBITDA of Rs3.1cr in Q2FY19.
Consolidated Average Length Of Stay (ALOS) during H1FY19 stood at 3.95 days vs. 3.92 days for H1FY18.
Consolidated Average revenue per operating bed (ARPOB) during H1FY19 stood at Rs33,703 vs. Rs31,875
Mature hospitals ROCE is 21% in H1FY19.
By end of H1FY19, net debt is Rs2,964cr, net debt-to-equity is at 0.84 and net debt-to-EBITDA is at 3.06x.
Company expects margins expansion in the rest of the fiscal.
Short term focus of the management will to improve the asset utilization, grow by 10-12% yoy and to improve mature hospital EBITDA to 23% in the next few quarters.
Company has decided to transfer the front-end retail pharmacy business into a separate company Apollo Pharmacies Limited (APL) on a slump sale basis for consideration of Rs527.8cr. This money will be used to reduce the group debt.
Management has set a target of total 5,000 pharmacy outlets, revenue of Rs10,000cr and combined ROCE of 30% for Apollo Pharmacies in 5 years.
Front end pharmacies will also take care of its expansion hence it will improve the Hospital business cash flows.
Apollo Hospitals Enterprise Ltd is currently trading at Rs. 1,166.15, up by 20.8 points or 1.82% from its previous closing of Rs. 1,145.35 on the BSE.
The scrip opened at Rs. 1,155 and has touched a high and low of Rs. 1,176 and Rs. 1,142.55 respectively. So far 5,52,483 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 50 DMA.
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