Apollo Hospitals Q3 preview: Net profit expected to surge 46%

Apollo Hospitals Enterprise, a healthcare services company, is expected to report strong growth in its Q3 net profit and a low double-digit increase in revenue. This is due to reduced losses in its Apollo 24/7 business, which offset the weak seasonality for its flagship hospital business and the disruption caused by cyclones in South India. The company is set to release its October-December earnings on February 8.

As per the average of estimates by five brokerages, the company’s Q3 net profit is expected to surge 46 percent on year to reach Rs 238.30 crore against Rs 163.20 crore recorded in the same period last year. It is worth noting that the company’s bottom line in the year-ago period was impacted by a loss of Rs 74.20 crore in its digital health business, which houses Apollo 24×7.

Apollo’s revenue for the quarter is seen at Rs 4,829.30 crore, up around 13 percent from Rs 4,264 crore clocked in the same period last year.

Apollo 24/7 reduces losses
The healthcare services company’s digital health business is likely to reduce losses on year as well as sequentially as Apollo Hospitals aims to take the vertical towards breakeven by the end of FY24.

The reduction in losses of the digital business, which was a major drag to Apollo’s earnings last year is likely to boost its numbers this time around. Brokerage firm Prabhudas Lilladher expects losses in the digital business to come down to Rs 167 crore in Q3 as against Rs 200 crore in the previous quarter and Rs 210 crore in the year-ago period.

Moreover, the improved financials of the digital business are also expected to take some pressure off Apollo Hospitals’ operational performance in Q3. Kotak Institutional Equities hopes to see a 49 basis points-on-year improvement in Apollo’s EBITDA margin to 12.4 percent in Q3.

Growth in flagship hospitals business seen tepid
The growth in Apollo’s flagship hospitals business is expected to remain tepid in Q3 as it gets impacted by a weak seasonality and disruptions in operations due to cyclones in Southern India where the company has a strong presence.

However, the company’s effort to lift bed occupancy and average revenue per occupied bed (ARPOBs) is expected to hold steady in Q3. Nuvama Institutional Equities estimates occupancy to be around 66 percent, though down from 68 percent in Q2, but still better than the 65 percent seen in the year-ago period. Similarly, the firm forecasts ARPOBs to grow 11 percent in the year due to changes in patient mix.

Eyes on occupancy guidance and Apollo 24/7 stake sale
In a bid to clamp down on losses and reduce pressure on its operating margins, Apollo Hospitals was looking to sell some stake in its digital business, which also holds its Apollo 24/7 business. In that regard, stakeholders will remain focused on gaining some clarity on the plans of the stake sale.

Meanwhile, stakeholders will also be eyeing the company’s guidance with regard to bed occupancy going ahead. At the start of the current fiscal, Suneeta Reddy, Apollo Hospitals Enterprise, Managing Director had guided in an earnings call to take the occupancy for the company’s core hospital business to 70 percent by the end of FY24. Moneycontrol