The company has guided for debt reduction by Rs 700 crore in FY20, aided by cash generation from restructuring the pharmacy business and liquidation of an asset. The management has also guided to reduce the promoter pledge by 40-50 per cent over next six months, from the current 71 per cent, via the proceeds received from Munich stale sale monetisation.
“Apollo has pursued an aggressive expansion plan, which has resulted in subdued earnings over FY15-18. Further, regulatory headwinds have delayed earnings recovery. Post strong growth in FY19, we expect momentum to continue, with an 20 per cent EBITDA CAGR over FY19-21E, led by better case mix, reducing losses from Apollo Health & Lifestyle (AHLL) and increasing profit from new hospitals,” analysts at Elara Capital said in a quarterly update. The brokerage firm has ‘buy’ rating on the stock with the target price of Rs 1,625 per share.
“We are positive on the company’s long-term growth opportunity and strong revenue visibility following the completion of capex. While the stock has underperformed over the past few years due to earnings disappointment, we believe the stabilization in existing hospital margins, ramp-up in new hospitals and lower Apollo Health & Lifestyle Limited (AHLL) losses are signs of an earnings inflection,” said analysts at JP Morgan.
The brokerage firm believes the regulatory risk in the sector is priced into the stock at current levels and that an improving earnings trajectory should drive outperformance over the next year. It has a March 2020 target price of Rs 1,580 per share.
At 12:30 pm, Apollo Hospitals was trading 6.6 per cent higher at Rs 1,448, as compared to a 0.14 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped three-fold with a combined 2 million shares changing hands on the NSE and BSE.