X

Apollo Hospitals Enterprise Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Apollo Hospitals Enterprise Limited (APOLLOHOSP) Q3 FY23 Earnings Concall

Management Update:

  • [00:02:04] APOLLOHOSP said it had a good 3Q23, with healthcare services growing 10% YonY, excluding vaccines, driven by IT volume growth of 7%. Pricing and case mix also contributed to the growth.
  • [00:03:14] APOLLOHOSP saw an improvement in the payer mix, as cash and insurance segments registered a YonY improvement of 28% in revenues.

Q&A Highlights:

  • [00:11:30] Anuj Suneja from ICICI Prudential asked about the breakup of the expense of INR134 crore at 24/7. Sanjiv Gupta CFO answered that in Q3, the company invested in product and tech 30%, operations 20-22%, marketing 15% for customer acquisition, communication 15-20%, and support was remaining. This extra spending was only related to new line of businesses.
  • [00:13:42] Anuj Suneja from ICICI Prudential queried about INR1,500 crores of GMV and what’s the GMV to revenue bridge. Sanjiv Gupta CFO said that in 3Q23 the company did a GV of about INR543 crores and a total revenue of INR177 crores. The estimated revenue for this year is 1,500 crores with a growth of 2x for the next year. In terms of investment, Apollo Healthco aims to reach near break-even in 3Q24 or 4Q24.
  • [00:15:48] Shyam Srinivasan at Goldman Sachs queried that since occupancies have declined 300 bp, what are the targets for the next 12-18 months. Suneeta Reddy MD replied that APOLLOHOSP expects to hit its 70% occupancy target for the year, especially for 4Q23 the company expects to be close to 70%.
  • [00:18:54] Shyam Srinivasan at Goldman Sachs asked about the revenue mix between pharmacy and consult. Sanjiv Gupta CFO said that in Q3, pharma is about 50% and consultation together with IP/OP is about 45% and rest is diagnostic.
  • [00:20:39] Shyam Srinivasan at Goldman Sachs enquired the reason for more store closures. A. Krishnan Group CFO said the company expects to open about 950 new stores by FY23 and closed around 100 non-performing stores in FY23. The EBITDA on the pharmacy business was 7.38%. These new stores are expected to improve the EBITDA in the coming two quarters.
  • [00:21:50] Damayanti Kerai from HSBC enquired about the international patient contribution during 3Q23 and its outlook. Suneeta Reddy MD answered that the company moved from 5% last quarter to 7% and APOLLOHOSP is hopeful that it will be 10% in 4Q23.
  • [00:22:24] Damayanti Kerai from HSBC asked which segments in all cluster hospitals have room for improvement in terms of payer mix. Suneeta Reddy MD said the strategy has been changed from primary and secondary care to tertiary care, which should improve clinical offerings in Madurai, Kochi and Navi Mumbai in 4Q23.
  • [00:23:44] Damayanti Kerai from HSBC queried about the cost improvement plan for the business and its key drivers. Suneeta Reddy MD said that Apollo is aiming to achieve its goals by the end of 2023 or 2024. It will focus on creating surgical packages, reducing administrative costs, and improving overall efficiencies in the system to increase revenue and cut costs.
  • [00:25:00] Damayanti Kerai from HSBC asked about contribution from cash at the network level, as of 3Q23 in terms of payer mix. A. Krishnan Group CFO replied that around 80% is from cash and insurance.
  • [00:25:32] Shaleen Kumar from UBS Securities enquired about the like to like comparison of GMV since its nature has changed in 24/7.  A. Krishnan Group CFO said that as the company launch new lines of business, the mix of the engines will continue to change and be retained. APOLLOHOSP expects this process to mature over time.
  • [00:28:12] Harit Ahmed from Avendus Spark asked about the reason for AHLL Diagnostic segment seeing a sequential decline in margins. A. Krishnan Group CFO replied that the outlook for this quarter is muted in line with the overall industry trend. The company is expecting to be between 8-10% EBITDA growth on an even basis this year, and is planning to move up from 10% onwards next year as it start realizing more revenues from specialized areas.
  • [00:40:02] Kunal Randeria from Nuvama asked about APOLLOHOSP’s hospital ARPOBs being close to INR60,000 in metros and its outlook in coming years.  A. Krishnan Group CFO said the company will continue to focus on the payer mix opportunity in non-metro cities, while in metro cities focus on ARPOB growth of 8% CAGR. This is a combination of 4%, 5% on pricing and the balance on case mix.
  • [00:41:16] Rishabh Tiwari from Allegro Capital enquired about the combined pharmacy EBITDA numbers for 3Q23. A. Krishnan Group CFO answered that it was 7.4%.
  • [00:42:11] Nitin Agarwal with DAM Capital asked that when does the company estimate the online business to become EBITDA neutral. A. Krishnan Group CFO said the digital segment should become profitable in the last quarter of FY25. There are a few things that need to be done before then, but if they can be executed properly, the current team should be able to make it happen.
  • [00:50:35] Nitin Agarwal with DAM Capital enquired about selling bundled packages vs. specific illness tests, if it’s a stragety APOLLOHOSP is following. A. Krishnan Group CFO replied that APOLLOHOSP is doing a lot of health checks and pathology in its primary-care clinics, with wellness packages making up 7-8% of its diagnostic business. The company is hoping to increase this to 20% to offset stark comparisons in ala carte testing.
Related Post