Update on the Indian Equity Market:
On Tuesday, NIFTY closed 0.3% up at 16,615. Top gainers in NIFTY50 were TATACONSUM (+3.8%), WIPRO (+3.3%), and TECHM (+3.2%). The top losers were JSWSTEEL (-2.4%), ADANIPORTS (-2.3%), and TATAMOTORS (-2.2%). The top gaining sectors were IT (+2.6%), HEALTHCARE (+1.7%), and FMCG (+1.4%) while the top sectoral losers were METAL (-2.3%), PSU BANK (-1.8%), and PRIVATE BANK (-0.8%).
Infrastructure in place to compete in online pharmacy space – Apollo Hospitals
Excerpts of an interview with Ms Suneeta Reddy, MD of Apollo Hospitals (APOLLOHOSP), published on ET Now on 17th August 2021:
- In 1QFY22, 26% of the total 30% revenue growth was because of Covid revenue. Surgical volumes have started picking up from July 2021.
- In an attempt to have an omnichannel presence, Apollo’s 247 digital platform offers services, such as online pharmacy and teleconsultations, that are easier to access for the customer. 247 is helping Apollo to expand its reach and funnel patients into the system.
- 247 is the fastest growing healthcare app in India. Apollo has earmarked Rs 1,500 mn in FY22E as spends for the digital platform, as customer acquisition and marketing are high for the business.
- Apollo pharmacies have crossed 4,200 stores in India and the company is planning another 150 stores addition. Apollo has a distribution presence in 16,000 pin codes. Due to the wide reach, Apollo has the capability of 24×7 delivery within two hours which is a USP in the e-pharmacy space.
- In addition to the distribution capabilities, Apollo has 5,500 doctors available for tele-consult within 15 minutes and testing infrastructure. All these factors will help Apollo to compete with other corporate houses entering the online pharmacy space.
- Apollo plans to spend Rs 2,500 mn on capex in FY22E and Rs 4,500 mn on an acquisition. With a debt-to-equity ratio of 0.48 and cash and equivalents of Rs 8,800 mn, Apollo is fully funded to undertake the investments.
Asset Multiplier comments:
- Online pharmacies have seen a big growth in revenues during the covid-19 second wave. Consumers are preferring the convenience and limited contact nature of online shopping of common medicines, household medical devices such as oximeters, thermometers, and certain FMCG products sold by these players.
Consensus Estimate: (Source: market screener)
- The closing price of APOLLOHOSP was ₹ 4,921/- as of 17-August-2021. It traded at 86x/ 66x/ 53x the consensus earnings estimate of ₹ 56.9/ 75.1/ 92.8 for FY22E/23E/24E respectively.
- The consensus price target is ₹ 4,399/- which trades at 47x the earnings estimate for FY24E of ₹ 92.8/-
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