Hospital revenue up 22%, HealthCo EBITDA up 83%, occupancy at 70%, 4,330 bed additions planned over five years
There are quarters where a company meets expectations. And there are quarters where it beats consensus on revenue, EBITDA and PAT simultaneously — and then tells you the structural catalysts ahead are even more important than the quarterly delivery. Apollo Hospitals’ Q1FY27 was the second kind. Revenue beat consensus by 2%.
EBITDA beat by 4%. PAT beat by 5%. EBITDA margins came in 25 basis points ahead of expectations. And beneath the quarterly beat, the hospital business surged 22% year-on-year, HealthCo’s EBITDA nearly doubled, and the Keimed merger — which will enable the listing of the omni-channel pharmacy business — is on track. Nuvama Institutional Equities raises its target to Rs 9,900 from Rs 9,785 and retains BUY.
The Hospital Business
The core hospital business delivered a quarter that management would be genuinely pleased with. Revenue grew 22% year-on-year — driven by a combination of 11% growth in inpatient volumes, 4% pricing growth and 3% case mix improvement. Occupancy reached 70%, up 500 basis points year-on-year — aided by strong demand in Tamil Nadu and the eastern region, where Apollo has significant presence. Hospital EBITDA margins held at 24.2%, declining just 30 basis points year-on-year despite the inclusion of losses from new hospital openings.
“Hospital revenue growth was robust at 22% YoY, led by strong 11% YoY growth in IP volumes alongside 4% growth in pricing and 3% in case mix,” Nuvama notes. Management has guided for approximately 20% hospital revenue growth in FY27, underpinned by bed additions, specialty mix improvement, pricing and operational efficiency in existing facilities.
HealthCo
The HealthCo segment — which encompasses Apollo’s pharmacy distribution, Apollo 24|7 digital platform and the AHLL diagnostics and primary care business — has been the segment that most investors have historically treated as a drag on the Apollo story. Q1FY27 changes that narrative decisively. HealthCo posted 20% revenue growth year-on-year while EBITDA soared 83% year-on-year with margins improving 196 basis points to 5.8%. The driver was a 16% year-on-year fall in Apollo 24|7 operating costs — tight opex control that is accelerating the path to digital profitability.
GMV grew a strong 23% year-on-year. AHLL — Apollo Health and Lifestyle — sustained 15% growth, led by a robust 31% growth in the diagnostics business. “HealthCo posted 20% YoY revenue growth while EBITDA soared 83% YoY with margins steady at 5.8% (+196bp YoY), aided by lower 24/7 costs,” Nuvama notes — a segment that is transforming from a loss-making investment into a profitable and growing contributor.
The digital cash breakeven for 24|7 has been pushed one quarter to Q2FY27, with full breakeven including ESOP costs now expected in Q3FY27. This is a minor delay relative to prior guidance, but the direction is unchanged — the digital business is approaching profitability.
The Keimed Merger and Demerger
The most important structural development in the Apollo story is not a quarterly metric — it is the Keimed merger, which is on track, and the potential listing of the combined omni-channel pharmacy business that follows from it. Nuvama calls the HealthCo demerger “a key re-rating trigger”. When the pharmacy and digital health business is separately listed, it will be valued on its own growth and margin trajectory rather than being bundled into Apollo’s hospital-dominated consolidated valuation. A separately listed HealthCo — with 20% revenue growth, rapidly improving margins and GMV growing at 23% would likely attract a meaningfully higher multiple than it currently receives as part of the conglomerate.
“With the Keimed merger on track, potential listing of the omni-channel pharmacy business remains a key catalyst for value unlocking,” the report states.
The Bed Addition Programme
Apollo’s capacity expansion plan is one of the clearest growth visibility programmes in Indian healthcare. The company plans to add approximately 4,330 beds over the next five years for a total capex of Rs 111 billion. Over FY26-28, approximately 1,500 incremental beds will be added — with 40-50% expected to be operationalised in FY27 and the remainder in FY28.
Management has flagged that approximately Rs 1.5 billion in new hospital losses will be incurred in FY27 as these facilities ramp — a known and bounded drag that Nuvama has incorporated into its estimates.
Oncology is a specific area of strategic focus. Management views it as a multi-specialty hospital play — not just a single-specialty centre — and plans to grow its oncology contribution beyond the current 17% of revenue mix. For a business with Apollo’s brand, scale and clinical depth, oncology is a category where the long-term demand is structurally driven by disease prevalence and where premium pricing power is strongest.
The Valuation
Nuvama has revised its FY27 and FY28 estimates upward following the Q1 beat — revenue by 1.3% and 1.7%, EBITDA by 2.2% and 2.9%, and adjusted profit by 2.9% and 3.6% respectively. The brokerage expects Apollo to deliver 18% revenue and 23% EBITDA growth over FY26-28, driven by bed additions, modest ARPOB growth and improving HealthCo performance. On a SOTP basis, hospitals are valued at 27x FY28 EBITDA, HealthCo at 30x and AHLL at 20x. Nuvama’s has said a target of Rs 9,900, which is a 15% upside.
| Metric | Value |
|---|---|
| Current Market Price | Rs 8,600 |
| Target Price | Rs 9,900 (raised from Rs 9,785) |
| Upside | ~15% |
| Rating | BUY (Retained) |
| Valuation | SOTP — 27x/30x/20x FY28E EBITDA |
| Q1FY27 Hospital Revenue Growth | 22% YoY |
| Q1FY27 HealthCo EBITDA Growth | 83% YoY |
| Q1FY27 Occupancy | 70% (+500bps YoY) |
| FY26-28E Revenue CAGR | 18% |
| FY26-28E EBITDA CAGR | 23% |
| 5-Year Bed Addition Plan | 4,330 beds / Rs 111 billion |
| Current EV/EBITDA | 22x FY28E |