Capitaline

Analyst Meet / AGM 08-Nov-11

Conference Call

Apollo Hospitals Enterprises

Expects to fund major portion of capex for expansion plans through debt

Apollo Hospitals announced the financial results for the quarter ended September 2011 and held conference call on 08^th November 2011 to discuss the results and its future growth strategies.
Highlights of the Call:

The Standalone net sales higher by 19% to Rs 699.75 crore for the quarter ended September 2011. This is due to the 17% growth in sales from Healthcare services business to Rs 491.46 crore on the back of strong growth across the mature clusters coupled with the strong performance from the new hospitals (others). In addition, there was robust 25% growth in Pharmacies to Rs 208.47 crore.

In Hospitals, The Chennai cluster witnessed soft previous quarter due to the elections in Tamilnadu which has recovered during the quarter. The muted growth in inpatient volume and 8% growth in outpatient volume resulted in 8% growth in inpatient revenues to Rs 324.5 crore and 10% growth in outpatient revenues to Rs 104 crore for the half-year ended September 2011. The subdued growth in patient volume was on the back of closing of 30-bed liver transplant capacity for the reengineering. However, it expects good performance going forward.
The Hyderabad cluster Inpatient revenue grew by 27% to Rs 151.3 crore and outpatient revenue grew by 32% to Rs 28.9 crore for the half-year ended September 2011, on the back of 14% and 31% volume growth respectively. The strong volume growth in Hyderabad cluster was primarily due to the strong focus on COE's like Cardiology, Neurosciences and Oncology coupled with the new beds added over last 15 months.
The no of operating beds at Hyderabad cluster are at 930 as on 30^th September 2011 compared 809 as on 30^th September 2010. Further, The Average occupancy at 591 beds (64% utilization) as compared to 521 beds (68% utilization) in H1 FY11 and 560 beds (60% utilization) in Q1 FY11. Further, It informed that the Chennai cluster traditionally been dependant on outpatient volume and the Hyderabad cluster on in patient volume.
New Hospitals (others), in patient revenue grew by 23% to Rs 136.9 crore and outpatient revenue grew by 28% to Rs 25.4 crore for the half-year ended September 2011. There is good traction in Bhubaneswar with average occupancy already at 80% on the back of continuous increase in patient admissions.
The standalone pharmacies continue to witness margin improvement. It added 92 gross stores and closed 55 stores during the quarter, with net addition of 37 stores, it has 1257 stores as on September 30^th, 2011. The LFL (Like-for-Like) revenue per store growth for the pre FY 2007 batch of stores grew by 12% to Rs 2.37 crore and FY 2008 batch grew by 21% to Rs 1.87 crore. Further, the EBITA per store grew by 29% to Rs 1.4 lakh for the FY 2007 batch store. Also the EBITA per store improved to 0.4 lakh compared to 0.2 lakh in the corresponding previous period. The EBITDA expansion trajectory continues on the back of buying efficiencies and operating leverage. Further, it expects the EBITA margins improvement in overall pharmacy business going forward.

The Bhubaneswar Hospital occupancy at 152 beds (80% utilization) for the quarter ended September 2011, on the back of continuous increase in patient admissions. The EBITDA margins at 10% during the quarter compared to 3% in corresponding previous period.
During the quarter, Apollo REACH Hospitals at Karimnagar and Karur also performed well with revenue growth of 23% and 57% respectively.

As on September 30, 2011, it has 52 hospitals with total bed capacity of 8,513 beds, with 37 owned hospitals including JVs/ Subsidiaries and associates with 5888 beds and 15 Managed hospitals with 2625 beds. Further, Of the 5888 owned beds 5298 beds were operational and had occupancy of 72% in H1FY12.

Apollo Munich Health Insurance reported robust 83% growth in Gross written premium to Rs 83.2 crore for the quarter ended September 2011. However, it has posted loss Rs 7.1 crore at PAT level compared to Rs 21.7 crore in the corresponding previous period.
Further, the Gross Written Premium grew by 77% to Rs 155 crore for the six months ended September 2011. The incurred claim ratio improved to 60% compared to 67% in corresponding previous period due to prudent underwriting and improved pricing.
Apollo Munich has now 50 offices across the country. Further, it assets under Management stood at Rs 280.1 crore as on 30^th September 2011.
Apollo Health Street recorded 10% growth in sales to Rs 244.1 crore for the half-year ended September 2011. However, it has posted loss of Rs 8.4 crore compared to profit Rs 3.6 crore in the corresponding previous period. It has one off litigation costs of approximately Rs 10.1 crore for the half-year ended September 2011.
The interest for the current quarter include Rs 3.25 crore on account of unrealized forex translation loss and other income for the corresponding previous quarter includes Rs 2.31 crore forex translational gain.
It plans to add two hospitals in Chennai and one in Patna totaling to 650 beds in addition to the ongoing projects of over 2200 beds Pan India.
It's evaluating a 250-bed hospital management agreement in Rwanda in Africa after announcing a JV with the Government of Tanzania to set up a 250-bed tertiary care hospital in Dar es Salaam.
It also engaged in a 250-bed hospital project management in Chittagong, which will be the Group's second hospital in Bangladesh. Further, 20 critical care beds and 33 in patient beds were commissioned and operational at IMCL, New Delhi
The Indraprastha Apollo Hospital, New Delhi reaccredited by Joint Commission International (JCI) for another 3 years. The Apollo Group continues to enjoy the largest number of JCI ranked facilities in Asia with 7 accredited facilities.
As part of its expansion plans, It's coming up with 2860 beds by FY'15. The total estimated project cost is Rs 1861.1 crore out of which AHEL's share is Rs 1646.3 crore. It has already invested Rs 156.7 crore out of its share of total capex.
It is to focus on owned hospitals as part of expansion plans as the number of owned hospitals to increase to over 49 from 37 and number of owned beds to go up to over 8500 from 5888.
It has raised Rs. 330 crore of equity funds, through QIP issue of 6.7 million equity shares at Rs. 495 per share to part fund Hospital expansion plans during the quarter. Further, Rs 200 crore through warrants and the remaining amount to fund through debt. Also, the management insisted that it wouldn't go for any further dilution in next 4-5 years.
The Standalone debt is at Rs 640.60 crore as on 30^th September 2011 compared to Rs 741.01 crore as on 31^st March 2011. The Cash and bank balances are at Rs 91.43 crore as on 30^th September 2011 compared to Rs 141.38 crore as on 31^st March 2011.

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