APOLLOHOSPITALS_Firstcall_221112

7/28/2019 APOLLOHOSPITALS_Firstcall_221112

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CMP 844.00

Target Price 945.00

ISIN: INE437A01024

Nov 19th

, 2012

APOLLO HOSPITALS ENTERPRISE LTDResult Update: Q2 FY13

BUYBUYBUYBUYStock Data

Sector Healthcare

BSE Code 508869

Face Value 5.00

52wk. High / Low (Rs.) 899.40/452.20

Volume (2wk. Avg ) 68000.00

Market Cap ( Rs in mn ) 113484.24

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY12A FY13E FY14E

Net Sales 28000.70 32760.82 37674.94

EBITDA 4922.50 5881.26 6744.73

Net Profit 2309.90 2921.26 3491.73

EPS 17.18 21.73 25.97

P/E 49.13 38.85 32.50

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX APOLLO HOSPITALS ENTERPRISE LTD

Source: Company Data, Firstcall Research

SYNOPSIS

Apollo Hospitals Enterprise Ltd. is the leading

private sector healthcare provider which

owns & manages specialty hospitals, clinics,

pharmacy retail outlets

During the Second quarter ended the robust

growth in the Net Profit of the company and

it is rose by 49.28% to Rs. 832.40 million.

Apollo has introduced Indias first 320-slice

CT scanner.

The company is planning to add 15 new

hospitals and 3,140 owned beds by the end of

the financial year 2015.

Apollo has entered into partnership with

healthcare division of Philips offer MRI guided

high intensity focused ultrasound solution.

Apollo entered into agreement with Cytori

Therapeutics to offer Celution R system in

India, to provide the best-in class regenerative

medicine technology.

The company signed an agreement with Govt

of Tanzania to start 250-bed super-specialty

hospital offers world class healthcare services.

Net Sales and PAT of the company are

expected to grow at a CAGR of 17% and 24%

over 2011 to 2014E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Apollo Hospital Enterprise Ltd 844.00 113484.24 17.18 49.13 4.91 80.00

Fortis Healthcare 101.00 40885.00 5.77 17.49 1.28 0.00

Indraprastha Medical Corporation 39.75 3685.30 3.14 12.80 2.31 16.00

Lotus Eye Care Hospital 8.15 169.50 0.00 0.00 0.33 0.00


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Investment Highlights

Results updates- Q2 FY13,

Apollo Hospitals Enterprise Ltd is Indias first and

largest branded pharmacy network, with over 1,350

outlets in key locations, reported its financial results

for the quarter ended 30th Sep, 2012. The Second

quarter witnesses a healthy increase in overall sales

as well as profitability of the company.

Months Sep-12 Sep-11 % Change

Net Sales 8363.20 6997.50 19.52%

PAT 832.40 557.60 49.28%

EPS 5.98 4.24 40.98%

EBITDA 1583.60 1267.00 24.99%

The companys net profit jumps to Rs.832.40 million against Rs.557.60 million in the corresponding quarter

ending of previous year, an increase of 49.28%. Revenue for the quarter increase 19.52% to Rs.8363.20 million

from Rs.6997.50 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs.5.98 a share during the quarter, registering 40.98% increase over previous year period.

Profit before interest, depreciation and tax is Rs.1583.60 millions as against Rs.1267.00 millions in the

corresponding period of the previous year.

Expenditure :

During the quarter Total Expenditure rose by19 percent mainly on account of Increase in Selling &

Distribution Expenses along with consideration ofEmployee Benefit Expenses in the rupee impact.

Total expenditure in Q2 FY13 was at 7193.20

million as against Rs.6054.70 million in Q2FY12.Cost

of Material Consumed Rs.2133.80 against

Rs.1977.10 millions in the corresponding period of

the previous year. Other Expenditure at Rs. 1035.40

million and Depreciation is Rs. 269.90 million in

Q2FY13 are the primarily attributable to growth of

expenditure.


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Segment Revenue

Latest Updates

Launches Novalis TXThe company has first to launch novalis TX and G4 Cyber knife Robotic Radio surgery system for Cancer

Treatment in India.

Installation of PET-CTThe company is the first to install 64 slice Positron Emission Tomography-Computed Tomography (PET-CT)

scan system in India.

Partnership with Philips HealthcareApollo has entered into a partnership with the healthcare division of Philips to offer MRI guided high

intensity focused ultrasound (HIfu) solution.

International Bariatric InstitutionThe company signed a mou with International Bariatric Institution to promote methods of performing

bariatric surgery through endoscopy without incision.

Agreement with CytoriApollo entered into an agreement with Cytori Therapeutics to offer the Celution R system in India, to provide

the best-in class regenerative medicine technology.


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Agreement with TanzaniaThe company signed an agreement with the Government of Tanzania to start a 250-bed super-specialty

hospital, offering world class healthcare services.

Enter into UCLThe company has entered into an mou with the University College London (uCL) for collaboration in training

and clinical research

Credit RatingCRISIL has rated the debt instruments as AA indicating high degree of safety. CRISIL Equities has upgraded

Company CRISIL IER fundamental grade to 5/5 from 4/5. The grade indicates the fundamentals are excellent

relative to other listed equity securities in India.

Allotment of Equity SharesThe company allotted 3276922 equity shares of the face value of Rs.5/- each at a price of Rs.472.46 per share

(including a premium of Rs467.46 per share).

SubsidiaryThe company has transferred seven of the clinics through a slump sale arrangement to 100% subsidiary

Apollo Health & Lifestyle Ltd.

Bagged Asian Hospital Management Awards 2012Indraprastha Apollo Hospitals, Delhi has been awarded for Apollo Community Outreach Programme and

Improving Patient Satisfaction Levels. Apollo Gleneagles Hospital, Kolkata has received awards for efforts in

ensuring Increased Productivity through reduction of length of stay and Project ESCALATE (Eleven Strategies

to Combat Antimicrobial Resistance Rate).

Robotic Surgery at ApolloThe latest state-of the-art da Vinci si Robotic system installed at Apollo Chennai, Kolkata and the Hyderabad

hospitals.

Plans for FY 2015The company is planning to the add 15 new hospitals and 3,140 owned beds by the end of the financial year

2015.


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Company Profile

Apollo Hospitals Enterprise Limited (AHEL) was incorporated as a Public Limited Company in the year 1979.

Promoted by Dr. Prathap C Reddy, it is the first group of hospitals that pioneered the concept of corporate

healthcare delivery in India. AHEL today, is the leading private sector healthcare provider in Asia and owns and

manages a network of specialty hospitals and clinics, a chain of Pharmacy retail outlets across the country, and

provides Consultancy Services for commissioning and managing the Specialty Hospitals. Apollo Hospitals has

also played a pioneering role in helping India become a center-of-excellence in global healthcare.

The Apollo Hospitals group today includes over 8,500 beds across 54 hospitals in India and overseas,

neighborhood diagnostic clinics, an extensive chain of Apollo Pharmacies, medical BPO and health insurance

services and clinical research divisions that are working on the cutting edge of medical science.

Apollo Hospitals Group had become an integrated healthcare organization with owned and managed hospitals,

diagnostic clinics, dispensing pharmacies and consultancy services. In addition, the group's service offerings

include healthcare at the patient's doorstep, clinical & diagnostic services, medical business process outsourcing,

third party administration services and health insurance. To enhance performance and service to customers, the

company also makes available the services to support the business of healthcare; telemedicine services,

education and training programmes & research services and a host of not- for- profit projects.

Services offered Cardiology & Cardiothoracic Surgery Orthopedics & Joint Replacement Surgery Spine Surgery Oncology Medical & Surgical Gastroenterology Neurology & Neurosurgery Nephrology & Urology Cancer Care

Primary Care Clinics Clinical Research & Site Management Owned & Managed Hospitals.

Group Brands Apollo Clinics Apollo Telemedicine Networking Foundation & Apollo Tele Health Services


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E Wellness Rx Health net Global Apollo Munich Health Insurance Apollo Health street Med Varsity Apollo Hospitals Education & Research Foundation Apollo Pharmacy Health Hiway Apollo Health Knowledge City The Cradle Apollo Life Apollo Global Projects Consultancy

Alliances AIG International Group American Life Insurance Company Vanbreda International SOS Seven Corners

Companion Global Health Care Emergency Assistance Japan GMC Services International Claims Service Prestige International

Subsidiaries Unique Home Health Care Ltd AB Medical Centres Ltd Samudra Healthcare Enterprises Ltd Apollo Hospital (UK) Ltd Apollo Health and Lifestyle Ltd Western Hospitals Corporation Pvt Ltd Apollo Cosmetic Surgical Centre Pvt Ltd Pinakini Hospitals Ltd

Imperial Hospital and Research Centre Ltd Alliance Medicorp (India) Ltd Healthcare India Private Ltd Mera Healthcare India Private Ltd Apollo Koramangala Cradle Ltd Alliance Dental Care Private Ltd


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Financial Highlight

Balance sheet as at March 31st, 2012

(A*- Actual, E* -Estimations & Rs. In Millions)

Particulars March (Rs.in.mn) FY12A FY13E FY14E

1.Shareholders Funds

a) Capital 672.30 672.30 672.30b) Money received against share warrants 387.05 290.29 243.84c) Reserves & Surplus 22463.28 25384.56 28430.71

Total Net worth 23522.63 26347.15 29346.85

2.Loan Fund

a) Secured loans 3742.20 4116.42 4322.24b) Unsecured loans 1857.50 1746.05 1623.83c) Differed Tax liability 1700.85 1955.98 2092.90

Total Liabilities (1+2) 30823.18 34165.60 37385.81

1.Fixed Assets

a) Gross block 19241.52 21646.71 23623.79b) Depreciation 4827.50 5503.35 5778.52c) Net Block 14414.02 16143.36 17845.27d) Capital Work in Progress 2213.70 2435.07 2556.82

Total Fixed Assets 16627.72 18578.43 20402.102. Investments 7641.18 8710.95 9582.04

3.Current Assets, Loans & Advances

a) Inventories 1827.10 2082.89 2270.35b) Sundry Debtor 3537.70 4032.98 4315.29c) Cash & Bank Balance 1869.55 2093.90 2240.47d) Other Current Assets 0.00 0.00 0.00e) Loans & Advances 6079.98 6262.38 6512.87

Total Current Assets 13314.33 14472.15 15338.98

Less: Current Liabilities & Provisions

a) Liabilities 3329.81 3754.06 3941.76b) Provisions 3430.24 3841.87 3995.54

Net Current Assets 6554.28 6876.22 7401.68

Total Assets( 1+2+3+4) 30823.18 34165.60 37385.81


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Annual Profit & Loss Statement for the period of2011 to 2014E

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 23319.60 28000.70 32760.82 37674.94

Other Income 213.70 278.50 311.92 339.99Total Income 23533.30 28279.20 33072.74 38014.93

Expenditure -19550.10 -23356.70 -27191.48 -31270.20

Operating Profit 3983.20 4922.50 5881.26 6744.73

Interest -587.30 -636.00 -680.52 -711.14

Gross profit 3395.90 4286.50 5200.74 6033.59

Depreciation -702.60 -911.30 -1057.11 -1183.96

Profit Before Tax 2693.30 3375.20 4143.63 4849.63

Tax -876.10 -1065.30 -1222.37 -1357.90

Net Profit 1817.20 2309.90 2921.26 3491.73

Equity capital 623.60 672.30 672.30 672.30

Reserves 16413.03 22463.30 25384.56 28430.71

Face value 10.00 5.00 5.00 5.00

EPS 29.14 17.18 21.73 25.97

Quarterly Profit & Loss Statement for the period of 31stMar, 2012 to 31stDec, 12E

Value(Rs.in.mn) 31-Mar-12 30-Jun-12 30-Sep-12 31-Dec-12E

Description 3m 3m 3m 3m

Net sales 7445.60 7773.90 8363.20 8530.46

Other income 64.60 40.70 143.70 186.81

Total Income 7510.20 7814.60 8506.90 8717.27

Expenditure -6245.30 -6470.00 -6923.30 -7080.29

Operating profit 1264.90 1344.60 1583.60 1636.99

Interest -154.90 -136.70 -188.40 -194.05

Gross profit 1110.00 1207.90 1395.20 1442.94

Depreciation -240.80 -251.10 -269.90 -283.40

Profit Before Tax 869.20 956.80 1125.30 1159.54

Tax -276.00 -259.40 -292.90 -322.35

Net Profit 593.20 697.40 832.40 837.19

Equity capital 672.30 679.20 695.60 695.60

Face value 5.00 5.00 5.00 5.00

EPS 4.41 5.13 5.98 6.02


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Ratio Analysis

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 29.14 17.18 21.73 25.97

EBITDA Margin (%) 17.08% 17.58% 17.95% 17.90%

PBT Margin (%) 11.55% 12.05% 12.65% 12.87%

PAT Margin (%) 7.79% 8.25% 8.92% 9.27%

P/E Ratio (x) 28.96 49.13 38.85 32.50

ROE (%) 10.67% 9.98% 11.21% 12.00%

ROCE (%) 19.17% 20.30% 21.73% 22.48%

Debt Equity Ratio 0.43 0.24 0.23 0.21

EV/EBITDA (x) 14.72 23.81 19.94 17.41

Book Value (Rs.) 273.20 172.06 193.79 216.44

P/BV 3.09 4.91 4.36 3.90

Charts


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Trends and Investments

The hospital and diagnostic centre in India has attracted foreign direct investment (FDI) worth US$ 1.40 billion,

while drugs & pharmaceutical and medical & surgical appliances industry registered FDI worth US$ 9.66 billion

and US$ 523.54 million, respectively during April 2000 to June 2012, according to data provided by Department

of Industrial Policy and Promotion (DIPP).

German manufacturing company Carl Zeiss has established a research and development (R&D) unit andtwo manufacturing facilities in Electronics City in Bengaluru

The Kerala Institute of Medical Sciences (KIMS) Group has expanded its overseas operations, with theRoyal Bahrain Hospital (RBH). KIMS-RBH is Bahrain's first custom-built hospital in the private sector,

and it had Bahrain's first operational sleep lab, advanced laser technology for cosmetic surgery, and

foetal medicine treatment facilities, among others

American Oncology Institute (AOI, US) and Cyberabad Citizens Health Services, have invested Rs 220crore (US$ 40.37 million) to set up a cancer institute in Hyderabad. The market is projected to grow to Rs

5,000 crore (US$ 917.43 million) by 2016, as per the Clearstate data

Piramal Enterprises has been investing in German molecular imaging technology. Piramal sees revenuepotential of US$ 1.5 billion from its florbetaben molecule technology

Japan's diversified trading company Mitsui & Co is buying an additional 25 per cent stake in activepharmaceutical ingredient (API) maker Arch Pharmalabs for Rs 372 crore (US$ 68.25 million), a move

that will raise its shareholding in the Mumbai-based privately-held company to 30 per cent

DM Healthcare, a leading healthcare conglomerate in India and West Asia, has announced an investmentof over Rs 2,150 crore (US$ 394.50 million) in Kerala. The company is in the process of developing an

array of healthcare facilities in various locations in the State and most of these projects are expected to

operational in the next five years

Vaccine producer Panacea Biotec has partnered with US-based Osmotica Pharmaceutical to sell 18products including liposomes, modified release oral dosage forms and depot injections in the US over

next 10 years

Mumbai-based Piramal Healthcare is in talks with the Chandigarh-headquartered Ind-Swift Laboratoriesto acquire its contract research and manufacturing business and many of its facilities approved by the US

Food and Drugs Administration (USFDA)

KEF Company plans to invest Rs 1,600 crore (US$ 293.57 million) in Kerala. The project includes a luxuryhotel, integrated manufacturing facilities and a super specialty hospital in Kozhikode

Strides Arcolab's wholly owned subsidiary Onco Therapies has received final ANDA approval forVinorelbine injection. The drug is used to treat different types of cancer as it is a chemotherapy drug that

slows cancer cell growth


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Medical Tourism

India is the most competitive destination with advantages of lower cost and sophisticated treatments,

highlighted the RNCOS report titled Indian Healthcare - New Avenues for Growth. The report further elaborates

that several key trends are backing the growth of Indias healthcare sector. Of these, medical city is relatively a

new concept that offers immense growth opportunities.

The upsurge in medical tourism is encouraging hospitals and hoteliers to strike alliances with each other. The

market size of medical tourism in India is growing at over 25 per cent annually at over US$ 2.5 billion, as per

industry estimates. Furthermore, this segment's growing business potential has prompted ITC Group to set up

Fortune Park Lake City business hotel at the Jupiter Life Line Hospitals complex in Thane, near Mumbai, to serve

medical tourists.

Government Initiatives

The Government has decided to increase health expenditure to 2.5 per cent of the gross domestic product (GDP)

by the end of the Twelfth Five Year Plan (2012-17) from the current 1.4 per cent.

Furthermore, a number of initiatives that have been proposed and taken up by the Government of India (GoI) for

enhancement of the healthcare sector are:

100 per cent FDI is permitted for health and medical services under the automatic route Allocation for National Rural Health Mission (NRHM) has proposed to be increased from Rs 18,115 crore

(US$ 3.32 billion) in 2011-12 to Rs 20,822 crore (US$ 3.82 billion) in 2012-13

National Urban Health Mission is being launched Pradhan Mantri Swasthya Suraksha Yojana being expanded to cover upgradation of seven more

Government medical colleges

Health and Nutrition

Proposal to extend concessional basic customs duty of 5 per cent with full exemption from excise duty/CVD to six specified life saving drugs/ vaccines

Basic customs duty and excise duty reduced on Soya products to address protein deficiency amongwomen and children

Basic customs duty and excise duty reduced on Iodine Basic customs duty reduced on Probiotics.


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The state governments are also undertaking various initiatives in this sector:

The Government of Assam has signed a memorandum of understanding (MoU) with NarayanaHrudayalaya Pvt Ltd for setting up a super specialty hospital. The hospital besides catering to patients

from Northeast India will also look after the patients from Bangladesh and Bhutan.

The Government of Gujarat is eager to develop specialized pharma machinery cluster in the State.Gujarat's pharma industry contributes 40 per cent to national pharma turnover and has a 22 per cent

share in Rs 42,263 crore (US $ 7.75 billion) pharmaceutical exports.

Road Ahead

With growing urbanization and the problems associated with modern-day living in urban settings, disease

profiles are shifting from infectious to lifestyle-related ones. In addition, there is substantial demand for high-

quality and specialty healthcare services in tier II and tier III cities. All these factors are creating huge demand forhealthcare services in the country.

There is a huge opportunity here for any country, including India, to maximise the use of diagnostics within the

healthcare environment. We have got very good high-end labs, which are equivalent to any country around the

world, as per Lance Little, Chairman and Managing Director, Roche Diagnostics India and South Asia.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.


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