Apollo Hospital: The one stop healthcare service

“At a time when the world is realizing the importance of prevention more than ever before, it is a matter of pride that Apollo has been at the forefront of this shift, recognizing that the best way to fight disease is to prevent it in the first place. One of our areas of focus is Artificial Intelligence (Al), which we believe holds the power to revolutionize preventive healthcare, by helping identify patterns, predict health risks, and enable early interventions”

– Dr Prathap C Reddy, Managing Director

Stock data

Ticker	APOLLOHOSP
Exchange	BSE and NSE
Industry	Healthcare

Price Performance:

Last 5 days	-1.24%
YTD	+10.45%
Last 1 year	+32.96%

Company description:

Established in 1983 by Dr. Prathap C Reddy, a renowned architect of modern healthcare in India, Apollo Hospitals is the nation’s first corporate hospital. It is acclaimed for pioneering the private healthcare revolution in the country. Apollo Hospitals has emerged as Asia’s foremost integrated healthcare services provider and has a robust presence across the healthcare ecosystem, including Hospitals, Pharmacies, Primary Care & Diagnostic Clinics and several Retail Health models.

Business Verticals:

1. Healthcare Business:

Company’s healthcare business has a capacity of 9,395 beds in 71 facilities located in India and overseas. Of the 71 facilities, 45 are self owned hospitals, 10 are cradles, 11 are day care/short surgical stay centers and 5 are hospitals under management.

Apollo Hospitals has facilities located in large urban centers such as Chennai, Hyderabad, Kolkata, Bengaluru, New Delhi, Ahmedabad, Mumbai, Pune, Bhubaneshwar, Madurai and Mysore among others. Presently, The company’s facilities function at comfortable utilization rates at around 69-70%. The Average Revenue per operating bed was ₹51,668/day in FY23 while it was ₹53,232/day in Q4FY23. 

2. Digital Health and Pharmacy Business:

Apollo Pharmacy is India’s first and largest branded pharmacy network. It has around 5,541 outlets present in 400+ cities/towns spread across 21 states & 4 union territories. Apollo Pharmacies has widened its offerings extensively. This segment which was traditionally focused on pharmaceutical products, is now equipped with a wide variety of wellness and private label products.

Recently, the company divested its front-end portion of its pharmacy business into Apollo Pharmacy Ltd. in which company holds 25.5% stake. Although, it is still the exclusive supplier to pharmacy business with long-term supplier agreement in place. Currently, the digital healthcare has ~25 million registered users and ~6000+ users.

3. Diagnostics and Retail health Business:

The company operates in the retail healthcare space through its 70% owned subsidiary Apollo Health & Lifestyle Ltd (AHLL). AHLL was introduced with an intention to take healthcare services from a purely ‘hospital’ setting closer to the home within the neighborhood with a goal to serve the community through multiple touch points.

AHLL owns ~1700+ retail touchpoints undertaking various activities like diagnostics, clinics, sugar clinics, cradle, spectra care, dental & dialysis. Of these touch points, the company has 22 Ambulatory care and birthing centers, 562 beds, 1700+ diagnostic centers, 343 clinics, 111 Dialysis centers and 129 dental centers.

Financials:

What we like:    

1. Omnichannel presence to boost growth:

Apollo is undergoing an optical transformational journey towards creating an omni-channel   healthcare platform that could set the platform for tapping new-age investors enabling rapid scale up of the digital healthcare platform. Business normalization in healthcare is expected to continue with further momentum due to lifting of travel restrictions, international patients. Also with a strong healthcare pedigree & asset base, the company is on course to integrate all entities digitally to leverage its brand and physical presence. The new hospitals and ventures are turning profitable on the back of a judicious case mix besides better occupancy & ramp up at new hospitals and Apollo Hospitals. Further, Apollo has tied up with Imperial hospitals Bangladesh to manage their 375 bed hospital in Chittagong, Bangladesh and has completed the acquisition of a hospital asset in Gurugram for INR 450 crore with potential for 650 beds over 700,000 square feet.

2. On track to reduce losses in HealthCo:

Apollo Hospitals is making efforts to exponentially grow its GMV (gross merchandise value), aggressively expand offline stores, improve the profitability of offline stores, and reduce opex for Apollo 24/7. Interestingly, Apollo provides the least discount of 16% for procuring medicines on the Apollo 24/7 platform compared to peers, which give 20- 25% discount. Despite lower discounts, online sales grew 3x YoY in 9MFY23. Due to strong support from offline stores, Apollo 24/7 is able to cater to time-sensitive supplies of medicines (two-hour delivery). APHS is on track to deliver a GMV of INR16b in FY23 (INR10.5b in 9MFY23). GMV comprises medicines (65%), diagnostics (15%), IP/OP referral fees and consultation. 

3. Integration through IT network to upscale patient touch-points:

Apollo Hospitals is creating multiple services to cater to patient needs through online (Apollo 24/7) and offline channels.It is ramping up physical and IT infrastructure to provide tele-consultation, medicines, specialty care (diagnosis, dialysis, dental, sugar, child care) as well as tertiary treatment. Its IT infrastructure has helped Apollo build ‘one patient, one record’ database, comprising diagnostic reports, diagnosis and patient medical history. It also allows online appointment booking.

Factors to consider:

1. The hospital industry is highly fragmented with a lot of competition from other brands. This can hamper the growth and topline of the company.
2. Delay in profitability of Apollo 24/7 can disrupt the bottomline of the company.
3. Any super specialist leaving the company or the patient filing a counter case may hamper the reputation of the company which in turn would affect the bottomline.