Apollo Hospitals posted good growth in sales but with margin fall and higher tax rate led to moderate PAT growth during the quarter. The Company Standalone sales grew by 18% YoY in Q2¡¯FY15 to Rs 1152.85 crore. The growth in Sales was primarily led by the robust growth Pharmacy business (29%) coupled with moderate growth from Hospitals (12%) during the quarter. However, Operating profit margins fell by 150 bps YoY to 15% and accordingly Operating profit grew by moderate 8% YoY to Rs 172.59 crore. After the sharp growth in other income (50%), but with lower interest cost (-11%) and after higher depreciation (22%) coupled with sharp rise in depreciation (up by 300 bps YoY to 24.9%), PAT grew by moderate 5% YoY to Rs 91.50 crore.
- Good growth in Sales:
The Sales grew by 18% YoY to Rs 1152.85 crore for the quarter ended September 2014. The growth in sales was on the back of robust growth in Pharmacy business (29%) coupled with moderate growth from Hospitals (12%) during the quarter. The Company Hospitals Expansion plans are on track, rollout of 600 new beds in FY15 underway. It has launched Women & Child, OMR (45 beds) during the quarter. The Nellore (200) and Chennai, OMR (170) hospitals are expected to be commissioned in Q3. Also, the Women & Child ACH (60 beds) & North Bangalore (180 beds) Hospitals are also in FY15 pipeline.
- Margins fall:
The margins fell by 150 bps YoY to 15% on the back of higher consumption cost (up by 130 bps YoY) coupled with increase in other expenditure (up by 60 bps YoY) despite the decline in other expenses (down by 30 bps YoY) and staff cost (down by 10 bps YoY) as percentage to sales and net of stock adjustments. Eventually, Operating profit grew by 8% YoY to Rs 172.59 crore.
- PAT grew by moderate 5% YoY:
After the sharp 50% growth in other income to Rs 8.20 crore, EBIDTA grew by 9% YoY to Rs 180.79 crore. With lower interest cost (down by 11% YoY to Rs 20.14 crore) and after higher depreciation (up by 22% YoY to Rs 38.35 crore), PBT grew by 9% YoY to Rs 121.80 crore. However, after the sharp rise in effective tax rate (up by 300 bps YoY to 24.9%), PAT grew by 5% YoY to Rs 91.50 crore.
- Revenue Mix ¨C Hospitals grew by 12% YoY, Pharmacy grew by robust 29% YoY:
The Revenues from the core Hospitals (62% of sales) grew by 12% YoY to Rs 715.77 crore for the quarter ended September 2014. Notably, Segment margins fell by 150 bps YoY to 17.3% and accordingly segment profit grew by 4% YoY to Rs 124.15 crore. However, Sales from Pharmacy business grew by strong 29% YoY to Rs 437.17 crore during the quarter. The segment margins slightly declined by 30 bps YoY to 2.2% and after this segment profit grew by 13% YoY to Rs 9.59 crore.
- Plans to add 2020 beds by FY¡¯17:
The Company has 54 hospitals with total bed capacity of 9,091 beds as on Sep 30, 2014. This includes 42 owned hospitals including JVs/ Subsidiaries and associates with 7,008 beds and 12 Managed hospitals with 2,083 beds. Of the 7008 owned beds capacity, 6073 beds were operational and had occupancy of 70%. It plans to add 9 hospitals from the current 42 (owned) and Plan to add 2,020 beds to the current 7,008 (owned) beds by the FY¡¯17. The Apollo has already invested Rs 730.6 crore as on 30th September 2014, of the Rs 1993.1 crore of its shares of total capex.
Standalone Half-yearly Performance:
The Sales grew by 18% YoY to Rs 2206.57 crore for the half-year ended September 2014. However, OPM fell by 150 bps YoY to 14.9% and after this Operating profit grew by moderate 7% YoY to Rs 328.88 crore. After 26% growth in other income to Rs 14.65 crore, EBIDTA grew by 8% YoY to Rs 343.53 crore. With fall in interest cost (down by 9% YoY to Rs 39.06 crore) and after higher depreciation (up by 26% YoY to Rs 78.77 crore), PBT grew by 6% YoY to Rs 225.70 crore. After the higher effective tax rate (up by 100 bps YoY to 22.8%) PAT grew by 5% YoY to Rs 174.24 crore.
Other highlights:
Hospitals:
The Chennai cluster showed a growth in occupancy of 949 beds (71% utilization on an increased capacity of 1,342 beds) in H1FY15 as compared to 901 beds (73% utilisation) in H1FY14. The Vanagaram, Chennai displayed good traction in H1FY15. Occupancy has touched 100 beds (58% utilization on a capacity of 171 beds) as compared to 26 beds in H1FY14.
The Hyderabad Cluster showed an occupancy of 608 beds (65% utilisation of 930 beds) in H1FY15 as compared to 622 beds (67% utilisation). More importantly however, the cluster witnessed expansion in profitability aided by higher numbers of international patients, focused efforts on case mix rationalization, growth in robotics and transplants as well as cost management.
Hospitals outside of the core clusters also delivered good results with advancement in key operating parameters:
- The New hospitals batch of FY13 ©\ Vanagaram & Jayanagar had a positive EBITDA of Rs 13 million in H1FY15.
- The Jayanagar, Bangalore occupancy at 55 beds (50 % utilization on a capacity of 109 beds) as compared to 36 beds in H1FY14. Revenues grew over 80% yoy.
- The FY14 / FY15 hospitals batch ¨C Trichy, Nashik & Karapakkam, Chennai are in their initial stages of operations and have H1FY15 revenues of Rs 159 mn and EBITDA loss of Rs 52 mn.
- The Bhubaneswar occupancy was at 216 beds (84% utilization on an increased capacity of 256 beds) as compared to 213 beds in H1FY14. Revenues grew 16% accompanied by improvement in EBITDA margin.
- The Rationalization of the case mix led to a dip in occupancy at Madurai. However, Revenues & EBITDA remained stable.
Apollo Hospitals Ahmedabad had occupancy of 182 beds (63% utilisation) in H1FY15 as compared to 181 beds (65%) in H1FY14. The hospital also witnessed EBITDA expansion aided by volumes & case mix improvement.
Apollo Hospitals Bangalore reported occupancy of 209 beds (78% utilisation) in H1FY15 as compared to 212 beds (79%) in H1FY14.
Apollo Gleneagles Kolkata reported an improvement in occupancy of 481 beds (89% utilisation) in H1FY15 as compared to 427 beds (84%) in H1FY14.
Standalone Pharmacies:
During the quarter, Apollo Pharmacies added 61 stores and closed 8 stores for a net addition of 53 stores ¨C total store network as of September 31 stands at 1,717 operational stores. For the half year, it added 114 stores and closed 29 for a net addition of 85 stores.
The EBITDA margin is increased by 10 basis points from 3.1% in H1FY14 to 3.2% in H1FY15. The increasing proportion of Private label products in the revenue mix has helped to mitigate the impact of the Drug Price Control Order tariff compression.
The business continued to report healthy growth in same©\store sales across various batches of stores with like©\for©\like growth in revenue per store at 15% for the pre 2008 batch of stores, 21% (2009 batch) and 18% (2010 batch). The EBITDA margin for mature stores (pre March 2008) was higher by 28 basis points from 5.5% in H1FY14 to 5.8% in H1FY15.
During the quarter, it acquired Hyderabad©\based pharmacy chain Hetero Med Solutions Ltd (HMSL). HMSL is a natural fit for Apollo given its significant presence in the territories of Andhra Pradesh, Telengana and Tamil Nadu which helps Apollo to enrich its Leadership position in these markets and widen the gap over the next largest player.
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