IDirect_ApolloHospitals_Q1FY16

August 14, 2015

ICICI Securities Ltd | Retail Equity Research

Result Update

Margin improvement; work in progress… • Revenues increased 20% YoY to | 1265 crore (I-direct estimate of

| 1316 crore) on the back of 34.7% YoY increase in pharmacy business to | 520.1 crore (I-direct estimate: | 550.7 crore). The healthcare business grew 11.6% to | 745 crore (I-direct estimate: | 765.6 crore) to | 745 crore

• EBITDA margins declined only 52 bps to 14.3% (I-direct estimate: 14.2%) on account of lower-than-expected other expenditure. EBITDA increased 15.8% YoY to | 181.1 crore

• Net profit rose 9.8% to | 90.8 crore (I-direct estimates: | 98.6 crore) Healthcare business growth to piggyback on sustained expansion The healthcare services segment (54% of consolidated revenues) has grown at a CAGR of ~16% in FY10-15 on account of incremental hospital addition in all three clusters i.e. Chennai, Hyderabad and others. Rapid expansion and maturity of older hospitals have kept the overall growth tempo over and above 15% per annum. The next phase of expansion includes addition of 1350 beds to the existing network of 40 hospitals and 7123 beds (own hospitals) by FY19 with an additional capex of | 1477 crore. This is likely to put some pressure on EBITDA margins in the short to medium term. However, in the past, the company has demonstrated its ability to balance between expansion and margins. By acquiring Nova speciality and Assam Hospitals, the company has also opted for the inorganic route for expansion. We expect more focus in improvement of important parameters such as average length of stay (ALOS) and average revenue per operating bed (AROPB) that have been flat in the last few quarters on account of incremental bed additions. We expect healthcare sales to grow at a CAGR of 12.4% in FY15-17E to | 4007.7 crore as the company keeps on investing in new assets. Pharmacy business EBITDA positive; candidate for value unlocking The pharmacy business (34% of consolidated revenues) has grown at a CAGR of ~30% over the last five years on the back of consistent addition of new pharmacies and timely closure of non-performing pharmacies. This business has become EBITDA positive as old stores are maturing and making a contribution. We expect the pharmacy business to grow at a CAGR of 13.7% in FY15-17E to | 2605 crore on the back of higher sales from existing stores. The company has added 45 stores in Q1FY16 along with consolidation of 304 Hetero stores taking total stores to 2171. In the last three years, we have seen a strong improvement in revenues per store from | 15 lakh in FY11 to | 27 lakh in FY15. The Hetero acquisition may put some pressure on margins initially but augurs well in the long run for scalability. Profitability of new hospitals key for overall margin improvement We expect consolidated sales, EBITDA and PAT to grow at a CAGR of 12.4%, 17% and 20%, respectively, in FY15-17E. The newly commissioned hospitals have achieved the break even (BE) level fairly ahead of our expectations. The focus will now shift to operational gauges for different cluster hospitals as the current phase of capex cycle nears the end. The Nova and Assam acquisition have demonstrated Apollo’s willingness to opt for the inorganic route for expansion through localised targets with good capability. On the other hand, pharmacy margins that showed an improvement recently may take a hit in the medium term on the back of the Hetero stores acquisition. Our revised target price is | 1400 as per SOTP valuation.

Rating matrix Rating : HoldTarget : | 1400Target Period : 12 monthsPotential Upside : 4%

What’s Changed? Target UnchangedEPS FY16E Changed from | 35.3 to | 30.9EPS FY17E Changed from | 43.4 to | 41.0Rating Changed from Buy to Hold

Standalone Quarterly Performance

Q1FY16 Q1FY15 YoY (%) Q4FY15 QoQ (%)Revenue 1,265.0 1,053.7 20.0 1,203.7 5.1EBITDA 181.1 156.3 15.8 174.5 3.8EBITDA (%) 14.3 14.8 -52 bps 14.5 -18 bpsNet Profit 90.8 82.7 9.8 77.3 17.5

Key Financials (| Crore) FY14 FY15 FY16E FY17ERevenues 4384.2 5178.5 6261.0 7346.3EBITDA 672.4 734.7 926.5 1176.7Net Profit 316.8 326.5 429.7 570.4EPS (|) 22.8 23.7 30.9 41.0

Valuation summary

FY14 FY15 FY16E FY17EPE (x) 59.1 55.0 43.5 32.8EV to EBITDA (x) 29.2 27.5 21.8 17.0Target EV/EBITDA (x) 31.4 29.5 23.4 18.3Price to book (x) 6.3 5.9 5.4 4.8RoNW (%) 10.6 10.4 12.4 14.7RoCE (%) 11.2 9.9 12.4 15.2

Stock data ParticularMarket CapitalisationDebt (FY15)Cash (FY15)EV 52 week H/L 1480/1022Equity capital | 69.6 croreFace value | 5

Amount| 18711 crore

| 18756 crore

| 422 crore| 377 crore

Price performance (%)

1M 3M 6M 1YApollo Hospitals -0.1 8.2 3.0 18.1Fortis Healthcare -1.0 11.7 29.0 55.8

Apollo Hospitals (APOHOS) | 1337

Research Analyst

Siddhant Khandekar [email protected] Mitesh Shah [email protected] Nandan Kamat [email protected]

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis Q1FY16 Q1FY16E Q1FY15 Q4FY15 YoY (%) QoQ (%) Comments

Revenue 1,265.0 1,316.0 1,053.7 1,203.7 20.0 5.1 Growth driven by ~34.7% growth in pharmacy segment Raw Material Expenses 672.5 684.3 553.2 629.9 21.6 6.8Employee Expenses 193.1 197.4 170.7 191.1 13.1 1.0Other expenditure 178.1 207.4 143.7 174.1 23.9 2.3EBITDA 181.1 187.4 156.3 174.5 15.8 3.8EBITDA (%) 14.3 14.2 14.8 14.5 -52 bps -18 bps The decline in margins was mainly due to higher growth in the low margin

pharmacy business and lower margins fetched by newly commissioned hospitals. The pharmacy business margins were 3.6% while healthcare services margins were 24%

Interest 26.9 18.9 18.9 22.6 42.0 19.1 Higher financial cost was mainly due to higher leverage for new facilities commissioned in Q4FY15

Depreciation 45.0 44.0 39.9 40.6 12.8 10.8Other Income 4.2 5.3 6.5 4.8 -34.9 -12.9PBT before EO & Forex 113.4 129.7 103.9 116.1 9.1 -2.4EO 0.0 0.0 0.0 -0.5 0.0 0.0PBT after Exceptional Items 113.4 129.7 103.9 116.6 9.1 -2.8Tax 22.5 31.1 21.2 39.3 6.4 -42.7Tax rate (%) 24.0 24.0 20.4 33.7 17.8 -28.8Net Profit 90.8 98.6 82.7 77.3 9.8 17.5 YoY growth was lower vis-à-vis EBITDA due to higher financial cost

EPS (|) 6.5 7.1 5.9 5.6 9.8 17.4Key MetricsHealthcare Services 745.0 765.6 667.6 725.8 11.6 2.6 Growth mainly driven by new hospital additionsPharmacy 520.1 550.7 386.2 478.0 34.7 8.8 Growth driven by integration of Hetero pharmacy, 45 net stores addition and

traction from mature stores. Excluding Hetero, revenue growth was 31%

Source: Company, ICICIdirect.com Research Change in estimates

(| Crore) Old New % Change Old New % Change CommentsRevenue 6,403.1 6,261.0 -2.2 7,519.5 7,346.3 -2.3EBITDA 1,013.9 926.5 -8.6 1,225.3 1,176.7 -4.0EBITDA Margin (%) 15.8 14.8 -100 bps 16.3 16.0 -28 bps Reduced margin expectation due to slower-than-expected margin improvement at new

facilitiesPAT 491.5 429.7 -12.6 604.3 570.4 -5.6EPS (|) 35.3 30.9 -12.5 43.4 41.0 -5.5

FY16E FY17E

Source: Company, ICICIdirect.com Research Assumptions

(% Growth) FY14 FY15 FY16E FY17E FY16E FY17EHealthcare Services 2,497.1 2,820.7 3,396.3 4,007.7 3,475.9 4,101.6Pharmacy 1,364.8 1,772.6 2,214.2 2,604.9 2,263.1 2,663.8Subsidiaries & consulting fees 249.7 285.6 313.3 350.9 327.1 366.3JVs 272.9 294.1 334.0 384.1 338.2 388.9

Current Earlier

Source: Company, ICICIdirect.com Research


Company Analysis Established in 1983, the company is one of the few listed players in the healthcare space. It derives revenues from two broader segments in standalone accounts - 1) Healthcare services i.e. hospitals & 2) standalone pharmacies. In consolidated accounts, other reporting segments are – 1) hospital revenues from JVs/subsidiaries & associates, 2) Apollo-Munich Health insurance JV, 3) ApolloHealth & Lifestyle Ltd, which is the retail healthcare business of Apollo Hospitals. Apollo owns 64 hospitals with a total bed capacity of 8985 beds. Of these 64 hospitals, 40 are owned by the company (including JVs, subsidiaries and associates) while eight are managed by the company with 1434 beds and 16 are day care/short surgical stay centres and cradles with 428 beds. This business has been categorised as the healthcare business and comprises ~61% of standalone revenues. In case of managed hospitals, the company charges 5-6% management fees to third-party hospitals for project management and consultancy covering all facets of development and operation of a hospital, including market research, technical design, arranging finance, hiring manpower and running the facility. The healthcare segment has been divided into three clusters- 1) Chennai, 2) Hyderabad and 3) others, which includes hospitals in Madurai, Karur, Karaikudi, Trichy, Mysore, Vizag, Pune, Karimnagar, Bilaspur, Bhubaneswar and Jayanagar. In case of standalone pharmacies, that are basically drug stores chain selling prescription, OTC and private label FMCG products, the company owns 2171 stores. Overall, we expect revenues to grow at a CAGR of 12.4% in FY15-17E to | 7346.3 crore. Exhibit 1: Revenues to grow at CAGR of 12.4% in FY15-17E

1614.22026.5

2605.43147.5

3768.74384.2

5178.5

6261.0

7346.3

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FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

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The healthcare services segment (54% of consolidated revenues) has grown at ~16% CAGR in FY10-15 on account of incremental hospital addition in all three clusters i.e. Chennai, Hyderabad and others. Rapid expansion and maturity of older hospitals have kept overall growth tempo over and above 15% per annum. The next phase of expansion includes addition of 1350 beds to the existing network of 40 hospitals and 7123 beds (own hospitals) by FY19 with an additional capex of | 1477 crore.


This is likely to put some pressure on EBITDA margins in the short to medium term. However, in the past, the company has demonstrated its ability to balance between expansion and margins. By acquiring Nova Speciality and Assam Hospitals, the company has also opted for the inorganic route for expansion. We expect more focus in improvement of important parameters such as average length of stay (ALOS) and average revenue per operating bed (AROPB), which were flat in the last few quarters on account of incremental bed additions. We expect healthcare sales to grow at 12.4% CAGR in FY15-17E to | 4007.7 crore as the company keeps on investing in new assets. Exhibit 2: Healthcare services to grow at CAGR of 12.4% in FY15-17E

1123.81341.5

1671.21940.2

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2820.7

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The pharmacy business (34% of consolidated revenues) has grown at a CAGR of ~30% in the last five years on the back of consistent addition of new pharmacies and timely closure of non-performing pharmacies. This business has become EBITDA positive as more and more old stores are maturing and making contribution. We expect the pharmacy business to grow at a CAGR of 13.7% in FY15-17E to | 2604.9 crore on the back of higher sales from existing stores. The company has added 45 stores along with consolidation of 304 Hetero stores in Q1FY16 taking total stores to 2171. In the last three years, we have seen a strong improvement in revenue per store from | 15 lakh in FY11 to | 27 lakh in FY15. The pharmacy business is also a candidate for possible value unlocking. Exhibit 3: Pharmacy business to grow at CAGR of 13.7% in FY15-17E

334.3484.6

661.4860.6

1101.71364.8

1772.6

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Exhibit 4: Subsidiaries & others to grow at CAGR of 7.1% in FY15-17E

72.994.5

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215.0249.7

285.6313.3

350.9

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Subsidiaries & consulting fees

Source: Company, ICICIdirect.com, Research

Exhibit 5: JVs sales to grow at CAGR of 9.3% in FY15-17E

83.1 105.8157.1

194.5235.8

272.9 294.1334.0

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Add JV

Source: Company, ICICIdirect.com, Research

Exhibit 6: EBITDA to grow at CAGR of 17% in FY15-17E

226.7300.6

418.3513.1

608.2672.4

734.7

926.5

1176.7

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Exhibit 7: Net profit to grow at CAGR of 20% in FY15-17E

105.0137.6

183.9218.6

271.4316.8 330.3

429.7

570.4

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Exhibit 8: Trends in return ratios

11.4 11.8 11.7

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Exhibit 9: Trends in Standalone quarterly financials (| crore) Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 YoY (%) QoQ (%)Total Operating Income 836.3 855.8 848.3 895.0 975.1 993.3 998.2 1053.7 1152.9 1182.5 1203.7 1265.0 20.0 5.1Raw Material Expenses 435.2 442.6 442.2 463.7 505.7 519.2 513.3 553.2 608.7 632.1 629.9 672.5 21.6 6.8as % revenues 52.0 51.7 52.1 51.8 51.9 52.3 51.4 52.5 52.8 53.4 52.3 53.2Gross Profit 401.1 413.2 406.1 431.3 469.3 474.2 484.9 500.5 544.1 550.5 573.8 592.5 18.4 3.3GPM (%) 48.0 48.3 47.9 48.2 48.1 47.7 48.6 47.5 47.2 46.6 47.7 46.8Employee Expenses 130.5 135.8 132.4 139.1 151.3 157.2 162.7 170.7 179.5 179.7 191.1 193.1 13.1 1.0as % revenues 15.6 15.9 15.6 15.5 15.5 15.8 16.3 16.2 15.6 15.2 15.9 15.3Marketing Expenses 103.5 108.9 118.9 125.0 133.7 132.6 141.4 143.7 156.1 157.2 34.0 40.2 -72.0 18.2as % revenues 12.4 12.7 14.0 14.0 13.7 13.3 14.2 13.6 13.5 13.3 2.8 3.2Other expenditure 23.1 22.1 22.0 21.3 24.2 26.6 30.8 29.8 35.9 39.0 174.1 178.1 498.3 2.3as % revenues 2.8 2.6 2.6 2.4 2.5 2.7 3.1 2.8 3.1 3.3 14.5 14.1Total expenditure 692.3 709.4 715.5 749.1 815.0 835.6 848.1 897.4 980.2 1007.8 1029.2 1083.9 20.8 5.3EBITDA 144.0 146.4 132.8 145.9 160.1 157.8 150.1 156.3 172.6 174.7 174.5 181.1 15.8 3.8EBITDA Margins (%) 17.2 17.1 15.7 16.3 16.4 15.9 15.0 14.83 14.97 14.77 14.50 14.31 -52 bps -18 bpsDepreciation 27.0 27.6 28.9 30.7 31.7 33.5 33.1 39.9 38.9 38.6 40.6 45.0 12.8 10.8Interest 18.8 19.3 20.8 20.5 22.6 23.1 20.9 18.9 20.1 21.7 22.6 26.9 42.0 19.1Other Income 14.4 8.0 4.6 6.2 5.5 3.8 7.0 6.5 8.2 25.8 4.8 4.2 -34.9 -12.9PBT 112.5 107.6 87.7 100.9 111.3 105.0 103.0 103.9 121.8 140.2 116.1 113.4 9.1 -2.4Less: Exceptional Items 0.0 0.0 4.5 0.0 0.0 0.0 0.0 0.0 0.0 -15.2 0.5 0.0Total Tax 29.3 26.9 16.7 22.0 24.3 21.5 21.7 21.2 30.3 30.0 39.3 22.5 6.4 -42.7Tax rate (%) 26.0 25.0 19.1 21.8 21.8 20.5 21.0 20.4 24.9 21.4 33.8 19.9Net Profit 83.2 80.6 75.5 78.9 87.0 83.4 81.3 82.7 91.5 95.0 77.3 90.8 9.8 17.5Net Profit Margin (%) 10.0 9.4 8.9 8.8 8.9 8.4 8.1 7.9 7.9 8.0 6.4 7.2EPS (Adjusted) 6.0 5.8 5.4 5.7 6.3 6.0 5.8 5.9 6.6 6.8 5.6 6.5


Exhibit 10: Standalone healthcare service performance (| Crore) Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 YoY (%) QoQ (%)Sales 558.9 565.3 562.7 590.9 636.5 636.3 633.4 667.6 715.8 711.5 725.8 745.0 11.6 2.6EBITDA 135.9 138.6 125.6 136.9 149.0 145.5 137.5 144.3 158.2 173.2 158.2 162.2 12.4 2.5EBITDA Margins (%) 24.3 24.5 22.3 23.2 23.4 22.9 21.7 21.6 22.1 24.3 21.8 21.8


Exhibit 11: Standalone pharmacy performance Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q2FY15 Q3FY15 Q4FY15 YoY (%) QoQ (%)

Sales (| crore) 247.7 277.6 290.5 285.9 304.2 338.6 357.1 364.9 386.22 437.17 471.2 520.1 42.6 10.4EBITDA (| crore) 6.1 8.1 7.8 7.2 9.0 11.1 12.2 12.5 12.01 14.4 15.1 18.9 50.8 25.2EBITDA Margins (%) 2.5 2.9 2.7 2.5 3.0 3.3 3.4 3.4 3.1 3.3 3.2 3.6No of Stores 1357 1399 1445 1503 1526 1560 1586 1632 1664 1717 1784 2171Rev per store (| lakh) 18.3 19.8 20.1 19.0 19.9 21.7 22.5 22.4 23.2 25.5 26.4 24.0


SWOT Analysis Strengths - Early mover in healthcare space. Strong balance sheet despite being in a business of higher gestation period. Strong brand value, a significant aspect in this business Weakness- Presence in low margin pharmacy space Opportunities - Under-penetrated Indian healthcare space with favourable demographics and disease pattern Threats - Too much capacity build-up may lead to lower capacity utilisation and cost associated with it


Conference call highlights

• The company plans to add 800 new beds in Navi Mumbai, Malleshwaram and Vizag by the end of FY16

• Net pharmacy store addition in Q1FY16 was 45 stores with integration of 304 Hetero stores taking total stores to 2171

• Apollo expects Hetero stores to be profitable by end of FY16 • It plans to add 875 beds by FY16 – North Bangalore 180, Chennai

Main 30, Navi Mumbai 350, Indore 65 and Vizag 250. Out of total bed addition in FY16, ~780 are expected to be added from its three new hospitals in Navi Mumbai, Malleshwaram and Vizag

• In FY17, facilities in Navi Mumbai and Bangalore are expected to get commissioned with 885 beds

• It plans to add another 475 beds in FY19 - South Chennai 175, South Mumbai 300

• Estimated capex for this expansion is ~| 1,477 crore, of which it has already spent | 640 crore. The remaining balance amount may be funded through a mix of internal accruals and proposed rights Issue. Majority of the capex would be done in FY16

• Two hospitals at Vanagaram and Jayanagar (added in the last 24 months) have more than 50% occupancies. Hospitals at Trichi, Nashik and Nellore are expected to reach 40-50% occupancy by end of FY16

• The acquired hospital in Guwahati is generating revenues of | 80-100 crore and is profitable. The company plans to increase the capacity from 200 beds to 300 beds in the next three to four years

• The company expects 25% EBITDA margins from the healthcare segment while pharmacy margins are expected to improve to 6% in the next two to three years

• The company expects a spike in expenditure on account of higher advertising and marketing costs from Q2FY16

• Apollo plans to enhance Hyderabad occupancy levels to 65-70% from 60% over the next few quarters


Valuation We expect consolidated sales, EBITDA and PAT to grow at a CAGR of 12.4%, 17% and 20%, respectively, in FY15-17E. The newly commissioned hospitals have achieved the break even (BE) level fairly ahead of our expectations. The focus will now shift to operational gauges for different cluster hospitals as the current phase of capex cycle nears its end. The Nova and Assam acquisition have demonstrated Apollo’s willingness to opt for the inorganic route for expansion through localised targets with good capability. On the other hand, pharmacy margins that showed an improvement recently may take some hit in the medium-term on the back of Hetero stores acquisition. Our revised target price stands at | 1400 as per SOTP valuation. Exhibit 12: One year forward EV/EBITDA

Mar

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EV 18.9x 18.1x 16.5x 14.1x 12.5x[


Exhibit 13: Valuation

Particulers Valuation Matrix Multiple (x) Enterprise value (| cr)Healthcare EV/EBITDA 16.0 16,351

Pharmacy EV/Sales 1.5 3,907

Others EV/Sales 1.0 734Cash 197

Expected Net Debt (| cr) 1,692EV 19,497

No of shares (cr) 13.9Per Share Value 1,401


Exhibit 14: Valuation Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE

(| crore) (%) (|) (%) (x) (X) (%) (%)FY14 4384 16 22.8 17 29.2 4.5 11.2 13.3FY15 5178 18 23.7 3 27.5 3.9 9.9 11.4FY16E 6261 21 30.9 32 21.8 3.2 12.4 13.2FY17E 7346 17 41.0 33 17.0 2.7 15.2 16.2



Company snapshot

Target Price:| 1400

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Source: Bloomberg, Company, ICICIdirect.com Research Key events Date EventSep-08 Opens first reach hospital at Karimnagar, Andhra Pradesh

Jun-09 Issues 1500 unsecured foreign currency convertible bonds of US$10000 each to International Finance Corporation aggregating to US$15 million. IFC also granted a loan

May-11 Pharmacy business of company turns profitable for first time

Sep-12 Government allows foreign direct investment in multi brand retail. Pharmacy business of Apollo Hospitals falls into this category

Dec-12 Sells stake in its BPO company Apollo Health Street to US based company Sutherland Global Services. It holds 39.4% in Apollo Health Street

Jan-13 Plans to establish a proton therapy centre in India. It will be first of its kind across South East Asia, Africa and Australia.

May-13 Apollo Hospitals and Yash Birla Group call off their JV & shut down their plans to set up super specialty hospitals in Thane, Mumbai

Sep-14 Enters into agreement to acquire 320 pharmacy stores from Hetero for | 146 crore

Jan-15 Acquires Bengaluru-based Nova Specialty Hospitals at an estimated cost of | 135-145 crore

Source: Company, ICICIdirect.com Research Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Position Chan1 PCR Investments, Ltd. 30-Jun-15 19.57 27.2 0.02 Integrated Mauritius Healthcare Holdings, Ltd. 30-Jun-15 10.85 15.1 0.03 OppenheimerFunds, Inc. 30-Jun-15 8.69 12.1 0.44 Reddy (Prathap C) 30-Jun-15 3.91 5.5 0.05 Fidelity Management & Research Company 30-Jun-15 2.92 4.1 -1.06 Newton Investment Management Ltd. 30-Jun-15 2.58 3.6 3.67 Reddy (Suneeta) 30-Jun-15 2.43 3.4 0.08 Schroder Investment Management Ltd. (SIM) 30-Jun-15 1.99 2.8 0.09 Reddy (Sangita) 30-Jun-15 1.75 2.4 0.010 MEAG Munich ERGO Kapitalanlagegesellschaft mbH 30-Jun-15 1.72 2.4 0.0

(in %) Jun-14 Sep-14 Dec-14 Mar-15 Jun-15Promoter 34.4 34.4 34.4 34.4 34.4FII 41.6 42.6 43.0 43.8 43.8DII 4.0 3.2 2.9 2.2 2.3Others 20.1 19.9 19.8 19.6 19.6

Source: Reuters, ICICIdirect.com Research Recent Activity

Investor name Value Shares Investor name Value SharesNewton Investment Management Ltd. 74.24m 3.59m Fidelity Management & Research Company -20.17m -0.97m Mirae Asset Global Investments (Hong Kong) Limited 14.51m 0.70m Life Insurance Corporation of India -13.69m -0.66m OppenheimerFunds, Inc. 8.43m 0.41m Schroder Investment Management (Singapore) Ltd. -4.03m -0.23m Reddy (Karthik Anand) 6.39m 0.33m Capital Investment Trust Corporation -3.59m -0.20m Reddy (Harshad) 6.19m 0.32m Sydinvest -3.11m -0.20m

Buys Sells

Source: Reuters, ICICIdirect.com Research


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Financial summary

Profit and loss statement | Crore (Year-end March) FY14 FY15 FY16E FY17ERevenues 4,384.2 5,178.5 6,261.0 7,346.3Growth (%) 16.3 18.1 20.9 17.3Raw Material Expenses 2,150.1 2,581.2 3,268.4 3,820.1Employee Expenses 727.5 860.0 957.5 1,124.0Marketing Expenses 115.2 155.5 214.6 235.1Other expenditure 719.1 847.0 894.0 990.5Total Operating Expenditure 3,711.8 4,443.7 5,334.5 6,169.7EBITDA 672.4 734.7 926.5 1,176.7Growth (%) 9.3 26.1 27.0Depreciation 167.8 211.7 232.4 268.2Interest 119.3 117.9 157.5 149.4Other Income 21.5 36.8 19.5 19.5PBT 406.8 442.0 556.2 778.6Total Tax 101.9 130.0 133.5 202.4MI & Profit from Associates 11.8 14.5 7.0 -5.8Adjusted PAT 316.8 326.5 429.7 570.4Growth (%) 16.7 3.1 31.6 32.7EPS (Adjusted) 22.8 23.7 30.9 41.0


Cash flow statement | Crore (Year-end March) FY14 FY15 FY16E FY17EProfit/(Loss) after taxation 316.7 339.9 429.7 570.4Add: Depreciation & Amortization 167.8 211.7 232.4 268.2Working Capital Changes -120.2 -207.4 -411.6 -80.6CF from operating activities 364.3 344.1 250.5 758.0Change in Capex -591.8 -722.7 -427.3 -600.0(Inc)/dec in Investments 205.1 10.9 0.0 0.0(Increase)/Decrease in Long term -162.9 -68.3 259.4 111.8Other investing activities 95.0 115.4 19.2 30.8CF from investing activities -454.5 -664.8 -148.8 -457.5Issue of Equity 1.1 0.0 0.0 0.0Inc/(dec) in loan funds 132.1 648.0 -200.0 -100.0Dividend paid & dividend tax -93.6 -96.4 -121.6 -161.4Other financing activities 5.6 -127.8 0.0 0.0CF from financing activities 45.3 423.8 -321.6 -261.4

Net Cash flow -44.9 103.2 -219.9 39.1Opening Cash 319.1 274.2 377.3 157.4Closing Cash 274.2 377.3 157.4 196.5


Balance sheet | Crore (Year-end March) FY14 FY15 FY16E FY17EEquity Capital 69.6 69.6 69.6 69.6Reserve and Surplus 2,907.1 3,100.6 3,408.7 3,817.6Total Shareholders funds 2,976.7 3,170.2 3,478.3 3,887.2Total Debt 1,344.3 1,992.3 1,792.3 1,692.3Deferred Tax Liability 351.9 422.2 422.2 422.2Minority Interest 18.8 74.2 78.4 84.1Long term provisions 2.3 3.4 23.4 43.4Other Non Current Liabilities 3.8 5.0 5.0 15.0Total Liabilities 4,697.7 5,667.3 5,799.6 6,144.3Gross Block - Fixed Assets 3,379.5 4,043.5 4,803.4 5,453.4Accumulated Depreciation 866.0 1,010.7 1,243.1 1,511.3Net Block 2,513.6 3,032.8 3,560.4 3,942.2Capital WIP 473.9 532.6 200.0 150.0Net Intangible assets 35.2 46.1 46.1 46.1Goodwill on Consolidation 149.9 165.2 165.2 165.2Total Fixed Assets 3,172.6 3,776.8 3,971.7 4,303.5Investments 321.6 310.6 310.6 310.6Inventory 278.6 350.3 415.3 467.9Debtors 519.8 609.3 769.3 903.1Loans & Advances, & other CA 272.9 456.4 562.6 542.8Cash 274.2 377.3 157.4 196.5Total Current Assets 1,345.4 1,793.3 1,904.6 2,110.4Creditors 325.0 419.1 506.8 594.6Provisions & Other CL 349.8 393.0 224.9 223.2Total Current Liabilities 674.8 812.1 731.7 817.8Net Current Assets 670.6 981.2 1,172.9 1,292.6Long term loans & advances 510.1 578.5 319.1 207.3Deferred Tax Assets 22.8 20.3 25.3 30.3Application of Funds 4,697.7 5,667.3 5,799.6 6,144.3


Key ratios (Year-end March) FY14 FY15 FY16E FY17EPer share data (|)Adjusted EPS 22.8 23.7 30.9 41.0Cash EPS 16.0 16.8 22.1 29.4BV per share 214.0 227.9 250.0 279.4Dividend per share 6.7 6.9 8.7 11.6Cash Per Share 62.2 72.6 89.3 108.6Revenue per Share 315.1 372.2 450.0 528.0Operating Ratios (%)EBITDA margins 15.3 14.2 14.8 16.0Net Profit margins 7.2 6.4 6.9 7.8Inventory days 23.2 24.7 24.2 23.2Debtor days 43.3 42.9 44.8 44.9Creditor days 27.1 29.5 29.5 29.5Return Ratios (%)RoE 10.6 10.4 12.4 14.7RoCE 11.2 9.9 12.4 15.2RoIC 13.3 11.4 13.2 16.2Valuation Ratios (x)P/E 59.1 55.0 43.5 32.8EV / EBITDA 29.2 27.5 21.8 17.0EV / Net Sales 4.5 3.9 3.2 2.7Market Cap / Sales 4.3 3.6 3.0 2.5Price to Book Value 6.3 5.9 5.4 4.8Solvency RatiosDebt / EBITDA 2.0 2.7 1.9 1.4Debt / Equity 0.5 0.6 0.5 0.4Current Ratio 1.6 1.7 2.4 2.3Quick Ratio 1.2 1.3 1.8 1.8Quick Ratio 1.2 1.3 1.8 1.8



ICICIdirect.com coverage universe (Healthcare) I-Direct CMP TP Rating M CapCode (|) (|) (| Cr) FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E FY15 FY16E FY17E

Ajanta Pharma AJAPHA 1684 1488 BUY 14675.5 36.0 45.6 53.1 33.1 27.8 23.9 7.8 6.5 5.3 50.6 48.7 46.4 41.9 38.5 35.9

Apollo Hospitals APOHOS 1337 1400 HOLD 18964.2 23.7 30.9 41.0 55.0 43.5 32.8 27.5 21.8 17.0 9.9 12.4 15.2 10.4 12.4 14.7

Aurobindo Pharma AURPHA 736 840 BUY 43455.7 28.0 36.7 42.0 27.9 20.5 17.9 10.1 7.8 6.3 23.5 25.5 25.0 30.3 29.9 26.1

Biocon BIOCON 462.9 469 HOLD 9227.0 20.4 23.0 28.0 23.0 20.4 16.7 6.9 5.4 4.2 10.4 11.8 13.3 12.5 12.7 13.9

Cadila Healthcare CADHEA 1945 2280 BUY 41189.3 56.2 75.1 95.6 20.8 15.6 12.2 14.7 11.2 8.6 21.3 24.6 26.6 26.4 27.3 26.8

Cipla CIPLA 725.5 650 HOLD 56831.7 14.9 22.3 29.5 30.1 20.1 15.2 3.4 2.8 2.2 13.2 17.6 19.9 10.8 14.3 16.2

Dr Reddy's Labs DRREDD 4292 4600 BUY 72913.5 130.6 159.9 191.6 21.6 17.7 14.7 13.9 11.2 9.2 17.0 19.3 20.6 19.9 20.1 19.8

Glenmark Pharma GLEPHA 1059 1000 HOLD 29183.4 16.5 33.7 47.5 38.6 18.9 13.4 16.5 11.6 8.7 12.6 23.7 29.5 14.3 24.0 26.7

Indoco Remedies INDREM 342 385 BUY 3218.8 9.0 12.6 19.2 24.3 17.4 11.3 12.4 10.0 7.1 19.8 22.3 28.0 16.0 19.0 23.4

Ipca Laboratories IPCLAB 771.2 665 HOLD 9706.0 20.2 25.0 41.5 18.7 17.0 11.6 3.2 2.9 2.4 11.5 11.0 16.6 11.5 11.0 16.6

Jubilant Life Sciences VAMORG 322 336 HOLD 4963.2 -3.7 13.2 23.6 0.0 11.8 6.6 9.5 7.2 5.3 5.7 8.9 12.1 -2.4 8.2 13.4

Lupin LUPIN 1643 1885 BUY 77484.7 53.6 55.7 75.4 30.7 29.5 21.8 -0.4 0.8 0.2 31.1 29.2 30.4 25.3 22.8 23.6

Natco Pharma NATPHA 2280 2200 HOLD 8026.9 31.2 46.4 67.1 23.0 15.5 10.7 15.9 12.2 9.2 15.6 19.6 23.0 12.4 16.6 19.8

Sun Pharma SUNPHA 879.1 850 HOLD 208438.7 19.8 20.5 32.6 44.2 46.9 25.5 24.6 24.0 16.6 19.0 18.3 22.8 20.8 18.5 23.6

Torrent Pharma TORPHA 1516 1660 BUY 25754.9 44.4 94.4 79.0 32.0 15.0 18.0 13.6 5.1 6.6 19.8 44.9 30.3 30.2 44.4 29.0

Unichem Laboratories UNILAB 236.5 214 HOLD 2136.2 8.3 14.8 21.4 24.8 13.9 9.6 17.9 9.4 6.5 8.4 17.1 21.5 8.7 14.5 18.5

RoNW (%)Company

EPS (|) PE(x) EV/EBITDA (x) RoCE (%)



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Pankaj Pandey Head – Research [email protected]

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IDirect_ApolloHospitals_Q1FY16