Buy Apollo Hospitals; target of Rs 1700: Edelweiss

June 12
16:24 2018

Edelweiss’ research report on Apollo Hospitals

Despite a strong Q4FY18 performance, the Apollo Hospitals’ (APHS) stock came off 3.8% today, after slipping 20% in past three months. What’s driving this weakness in the stock price? Regulatory headwinds have been unsettling for the hospital players. Other external factors like: i) demonetisation; ii) GST; iii) stents, knee implants and drug price control; and iv) increase in minimum wages for nurses in some states also marred sector profitability. Going ahead, some states are also trying to cap gross margins on consumables, which could further affect gross profits. Instead of addressing structural issues of the healthcare sector, populist measures are being offered. This has led to uncertainty and the APHS stock bears testimony to same.


As for APHS’ performance, having completed its capex cycle it is set to double EBITDA and reduce capex to one-third over the next three years. Maintain ‘BUY’ with SoTP-based target price of INR1,700.

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