8,500 beds in over 50 hospitals. 87 million multi-speciality clinics. 11 nursing and hospital management colleges and 1,364 pharmacies all over India. That is Apollo Hospitals. And its business is expectedly – booming.
Business is so good that Apollo is looking to add 3000 beds to its present tally. That will require an investment of `1,800 crore over the next three years. And that’s not the full story yet. It is also looking very closely at cosmetic surgery centres and day surgery centres to tap the opportunities in between. And it wants its multi-speciality clinic count to go up to 150.
Apollo’s pharmacy business contributes 32 per cent to the company’s topline and is going strong with a 30 per cent (y-o-y) growth in revenues. This low margin business (ebitda margin of only 1.7 per cent) inspite of its size brings in only 3 per cent of Apollo’s Ebit. The company hopes to up this number by adding more private label brands – from current levels of 4 per cent. The opening of FDI in retail may open up some opportunities for Apollo’s pharmacies, but that is yet to be seen.
Apollo is already up 25 per cent this year. It has mega expansion plans but new hospitals typically take three-four years before they start showing results. Apollo faces competition from the likes of Fortis that has similar plans. At 38.8 times earnings, the stock may not have much steam left. Yet, Apollo is a long-term story. In the past 10 years the stock has rewarded patient shareholders with 600 per cent plus returns. Hold with a long-term horizon. Hospitals are not really expected to go out of business – recession or not!
This article was originally published on November 07, 2012.
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