1

SYNOPSIS

Apollo Hospitals Enterprise Ltd. has

grown to become the largest private

healthcare company in India.

The Company has declared a dividend of

Rs.3.75 per share for the financial year

ending 31, March 2010-11.

Apollo hospital operates with 54

hospitals with total bed capacity of 8,717

beds as on Mar 31, 2011.

Apollo Hospitals to render specialist

health services to Tanzania with the sign

of a MoU between India and Tanzania.

During this quarter Apollo Hospitals in

collaboration with Aircel Mobile has

launched Mobile Health Care Service to

Aircel Customers.

Net Sales and PAT of the company are

expected to grow at a CAGR of 19%

and18% over 2010 to 2013E respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 23319.60 3983.20 1817.20 14.57 33.15

FY 12E 26584.34 4570.46 2137.89 17.14 28.18

FY 13E 30572.00 5213.59 2473.31 19.83 24.36

Stock Data:

Sector: Health Care

Face Value Rs. 5.00

52 wk. High/Low (Rs.) 599.00/367.00

Volume (2 wk. Avg.) 27971

BSE Code 508869

Market Cap (Rs in mn) 60239.76

Share Holding Pattern

1 Year Comparative Graph

Apollo Hospitals

Ltd BSE SENSEX

C.M.P: Rs. 483.00 Target Price: Rs. 555.00 Date: June 13th 2011 BUY

APOLLO HOSPITALS ENTERPRISE LTD Result Update: Q4 FY 11

2

Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Apollo Hospitals 483.00 60239.76 14.57 33.22 3.91 70.00

Opto Circuits 280.00 52191.90 13.10 21.37 4.81 40.00

Fortis Healthcare 162.65 65892.30 3.72 43.72 3.96 0.00

Indraprastha 35.95 3295.60 3.35 10.73 1.98 16.00

*As on13/06/2011

Investment Highlights

Q4 FY11 Results Update

During the quarter, the company disclosed a standalone profit of Rs. 470.90

million as against of Rs.292.00 million for the quarter ended March 31, 2010. Net

sales are increased by 29% to Rs. 6214.00 million from Rs. 4829.00 million in the

same quarter previous year. In the same period, standalone operating income of

the company was at Rs. 6272.50 million, a rise of 28% over the prior year period.

Company EPS is stood at Rs.3.78 for the quarter ended March 2011.

Quarterly Results - standalone (Rs in mn)

As At Mar-11 Mar-10 %change

Net sales 6214.00 4829.00 29

PAT 470.90 292.00 61

Basic EPS 3.78 4.73 (20)

3

Break-up of Expenditure

Segment wise Revenue

Segment Revenue (Rs. million)

Healthcare Services 4,394.50

Pharmacy 1,821.00

Others 58.5

Total 6,274.00

Less: Inter Segment Revenue -1.5

Net sales/income from Operations 6,272.50

4

Declaration of Dividend

The Company has declared a dividend of Rs.3.75 per share for the financial

year ending 31, March 2010-11.

Apollo Hospitals to render specialist health services to Tanzania.

Apollo Hospitals will render specialist health services in Tanzania following the

signing of a Memorandum of Understanding (MoU) between India and Tanzania.

The concentration of their hospitals in Tanzania would be to provide world-class

health facilities to the patients. This is going to be a brand new land, virgin land

on which they are going to build a hospital which will suit their design to deliver

tertiary and cardiac care hospital for people who do not have to go to other

place majority of times.

5

Mobile Health Care Service to Aircel Customers

Apollo Hospitals in collaboration with Aircel Mobile has launched the first ever

Mobile Health Care Service to Aircel Customers. Apollo Medical experts offer

health advice on Mobile to Aircel Customers.

Company Profile

Apollo Hospitals Enterprise Limited (AHEL) was incorporated as a Public Limited

Company in the year 1979. Promoted by Dr. Prathap C Reddy, it is the first group of

hospitals that pioneered the concept of corporate healthcare delivery in India. AHEL is

a listed Company on the Bombay Stock Exchange.

AHEL today, is the leading private sector healthcare provider in Asia and owns and

manages a network of speciality hospitals and clinics, a chain of Pharmacy retail

outlets across the country, and provides Consultancy Services for commissioning and

managing the Speciality Hospitals. Today Apollo Hospitals is not just one of the

country's premier healthcare providers but has also played a pioneering role in helping

India become a center-of-excellence in global healthcare.

The Apollo Hospitals group today includes over 8,717 beds across 54 hospitals in India

and overseas, neighbourhood diagnostic clinics, an extensive chain of Apollo

Pharmacies, medical BPO and health insurance services and clinical research

divisions that are working on the cutting edge of medical science. However the largest

achievement of the Apollo Group has been to take quality healthcare to across the

length and breadth of India.

By the start of the new millennium, Apollo Hospitals Group had become an integrated

healthcare organization with owned and managed hospitals, diagnostic clinics,

dispensing pharmacies and consultancy services. In addition, the group's service

offerings include healthcare at the patient's doorstep, clinical & diagnostic services,

medical business process outsourcing, third party administration services and heath

insurance. To enhance performance and service to customers, the company also

makes available the services to support the business of healthcare; telemedicine

services, education and training programmes & research services and a host of not-

for- profit projects.

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Company Services

Services offered by the company:

Cardiology & Cardiothoracic Surgery

Orthopedics & Joint Replacement Surgery

Spine Surgery

Oncology

Medical & Surgical Gastroenterology

Neurology & Neurosurgery

Nephrology & Urology

7

Financial Results 12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY10 FY11 FY12E FY13E

Description 12m 12m 12m 12m

Net Sales 18257.80 23319.60 26584.34 30572.00

Other Income 329.70 213.70 237.21 260.93

Total Income 18587.50 23533.30 26821.55 30832.92

Expenditure -15445.20 -19550.10 -22251.10 -25619.33

Operating Profit 3142.30 3983.20 4570.46 5213.59

Interest -377.50 -587.30 -646.61 -702.90

Gross profit 2764.80 3395.90 3923.85 4510.69

Depreciation -543.10 -702.60 -779.89 -873.47

Profit Before Tax 2221.70 2693.30 3143.96 3637.22

Tax -702.00 -876.10 -1006.07 -1163.91

Net Profit 1519.70 1817.20 2137.89 2473.31

Equity capital 617.80 623.60 623.60 623.60

Reserves 14800.00 16413.00 18550.89 21024.20

Face Value 10.00 5.00 5.00 5.00

Total No. of Shares 61.78 124.72 124.72 124.72

EPS 24.60 14.57 17.14 19.83

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 30-Sep-10 31-Dec-10 31-Mar-11 30-Jun-11E

Description 3m 3m 3m 3m

Net sales 5864.00 6008.70 6214.00 6524.70

Other income 68.40 50.80 58.50 60.84

Total Income 5932.40 6059.50 6272.50 6585.54

Expenditure -4867.90 -5066.10 -5266.40 -5480.75

Operating profit 1064.50 993.40 1006.10 1104.79

Interest -138.80 -133.50 -157.70 -162.43

Gross profit 925.70 859.90 848.40 942.36

Depreciation -178.30 -178.20 -182.80 -191.94

Profit Before Tax 747.40 681.70 665.60 750.42

Tax -251.80 -223.60 -194.70 -232.63

Net Profit 495.60 458.10 470.90 517.79

Equity capital 617.80 623.60 623.60 623.60

Face Value 5.00 5.00 5.00 5.00

Total No. of Shares 123.56 124.72 124.72 124.72

EPS 4.01 3.67 3.78 4.15

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Key Ratio

Particulars FY10 A FY11A FY12 E FY13 E

EBIDTA % 17% 17% 17% 17%

PAT % 8% 8% 8% 8%

P/E ratio (x) 19.64 33.15 28.18 24.36

ROE - % 10% 11% 11% 11%

ROCE - % 12% 14% 14% 15%

EV/EBIDITA (x) 9.78 24.02 14.76 14.44

Debt Equity Ratio 0.45 0.43 0.40 0.37

Book Value (Rs.) 249.56 136.60 153.74 173.57

Price/Book Value 1.99 3.54 3.14 2.78

Charts:

• Net sales & PAT

10

• P/E Ratio (x)

• P/BV (X)

11

• EV/EBITDA(X)

Outlook and Conclusion

At the current market price of Rs.483.00, the stock is trading at 28.18 x FY12E

and 24.36 x FY13E respectively.

Earning per share (EPS) of the company for the earnings for FY12E and FY13E

is seen at Rs.17.14 and Rs.19.83 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 19% and

18% over 2010 to 2013E respectively.

On the basis of EV/EBITDA, the stock trades at 14.76 x for FY12E and 14.44 x

for FY13E.

Price to Book Value of the stock is expected to be at 3.14 x and 2.78 x

respectively for FY12E and FY13E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.555.00 for Medium to Long term investment.

12

Industry Overview

The Indian healthcare sector is expected reach US$ 280 billion by 2020, according to a

report by an industry body. "Healthcare has emerged as one of the most progressive

and largest service sectors in India with an expected GDP spend of 8 per cent by 2012

from 5.5 per cent in 2009. It is believed to be the next big thing after IT and predicted

to become a US$ 280 billion industry by 2020," the report said.

Major Developments

As per a study by an industry body and Ernst & Young, India would require another

1.75 million beds by the end of 2025. The public sector however is likely to contribute

only around 15-20 per cent of the required US$ 86 billion investment. The corporate

India is therefore, leveraging on this business potential and various health care brands

have started aggressive expansion in the country. Some of the companies that plan to

increase their footprints include Anil Ambani’s Reliance Health, the Hindujas, Sahara

Group, Emami, Apollo Tyres and the Panacea Group.

Sahara Group is planning several healthcare projects such as a 200-bed multi-

specialty tertiary care hospital at Gorakhpur in Uttar Pradesh, a 1,500-bed multi

super-specialty, tertiary care hospital at Aamby Valley City and 30-bed multi-

speciality secondary care hospitals across all the 217 Sahara City Homes Townships.

Meanwhile, Artemis Health Sciences (AHS), a health care venture of the Apollo Tyres

Group, is also planning to establish four to eight multi-specialty hospitals in Punjab,

Uttar Pradesh, Madhya Pradesh, Rajasthan and Haryana over the next three years.

The rural healthcare sector is also on an upsurge. The Rural Health Survey Report

2009, released by the Ministry of Health, stated that during the last five years rural

health sector has been added with around 15,000 health sub-centres and 28,000

nurses and midwives. The report further stated that the number of primary health

centres have increased by 84 per cent, taking the number to 20,107.

The size of the Indian medical technology industry may touch US$ 14 billion by 2020

from US$ 2.7 billion in 2008 on account of strong economic growth, higher public

spending and private investments in healthcare, increased penetration of health

insurance and emergence of new models of healthcare delivery, according to a report

‘Medical Technology in India: Enhancing Access to Healthcare through Innovation’

released by PwC and an industry body.

13

Frontier Mediville, first healthcare special economic zone (SEZ) in the country, is being

set up Frontier Lifeline Hospital. The first phase of the project, with an investment of

around US$ 44.4 million, will come up at Elavoor, near Chennai.

Health Insurance

The Indian health insurance market has emerged as a new and lucrative growth

avenue for both the existing players as well as the new entrants. According to a latest

research report "Booming Health Insurance in India" by research firm RNCOS released

in April, 2010, the health insurance market represents one the fastest growing and

second largest non-life insurance segment in the country. The Indian health insurance

market has posted record growth in the last two fiscals (2008-09 and 2009-10).

Moreover, as per the report, the health insurance premium is expected to grow at a

compound annual growth rate (CAGR) of over 25 per cent for the period spanning from

2009-10 to 2013-14.

Investments in Healthcare

As per data released by the Department of Industrial Policy and Promotion (DIPP), the

drugs and pharmaceuticals sector has attracted foreign direct investment (FDI) worth

US$ 1.87 billion between April 2000 and January 2010, while hospitals and diagnostic

centres have received FDI worth US$ 980.38 million in the same period.

GE Healthcare plans to invest US$ 50 million to set up more facilities for developing

diagnostic services, including anesthesia, ventilation, computed tomography (CT)

systems and molecular imaging, according to Omar Ishrak, Chief Executive, GE

Healthcare Systems.

• MSD Pharmaceuticals Pvt Ltd plans to set up a research and developments

(R&D) centre with UK-based Wellcome Laboratories in India with a total

investment of US$ 130 million.

• Fortis Healthcare has joined hands with technology solutions provider

TotipotentRX Cell Therapy Pvt Ltd, to set up centres of excellence offering

cellular therapies and stem cell clinical trials, across select Fortis hospitals.

• The BCG Group plans to build a multidisciplinary health facility, BCG

Healthsquare in Palarivattam in Kochi, Kerala, by August 2011. The company’s

long-term plan is to set a 750,000 sq ft health village with an estimated cost of

US$ 88.91 million.

• Sri Biotech Laboratories India Ltd plans to set up an integrated discovery centre

at Genome Valley with an investment of US$ 6.67 million. The new discovery

centre will focus on agriculture, health and environment.

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• German pharmaceuticals and chemicals group, Merck KgaA has set up its first

laboratory - chemicals and technology solutions centre in India offering

customised services for its local as well as foreign clients in pharma, bio-

technolgy, cosmetics and other chemistry-based industries.

• Care Institute of Medical Sciences (CIMS), a hospital venture brought forth by a

group of doctors in Ahmedabad, has come up with India’s first ‘green hospital’.

• Drug maker Lupin plans to invest an average US$ 100 million each in the

coming years for capital expansion and acquisition of foreign companies,

according to Ramesh Swaminathan, President – Finance and Planning, Lupin.

• The Apollo Hospitals Educational and Research Foundation (AHERF) has firmed

up its stem cell research collaboration with US-based StemCyte, investing US$

15 million in the 50-50 venture.

• New Delhi-based hospitals chain Fortis Healthcare plans to invest US$ 146.81

million over next 12-18 months to add 2,100 new beds, said Bhavdeep Singh,

Chief Executive Officer, Fortis on November 3, 2010.

• Nova Medical Centres, a specialised day care surgery centre chain, plans to

invest nearly US$ 225.5 million for setting up 100 centers across the country

by 2014, said Suresh Soni, Chairman, Nova Medical Centres.

• Manipal Hospitals plans to invest US$ 45.23 million in the next three years to

double its capacity to 8,000 beds, said Rajen Padukone, Chief Executive Officer,

Manipal Hospitals.

• Wockhardt Hospitals plans to invest up to US$ 158.32 million to double its bed

capacity to 2,000 by 2013, said Anil V Kamath, Managing Director, Wockhardt

Hospitals Ltd.

According to a new report published by RNCOS, titled "Booming Medical Tourism in

India" India’s share in the global medical tourism industry will reach around 3 per

cent by the end of 2013. The report states that medical tourism is expected to generate

revenue around US$ 3 billion by 2013, growing at a CAGR of around 26 per cent

during 2011–2013. The number of medical tourists is anticipated to grow at a CAGR of

over 19 per cent during the forecast period to reach 1.3 million by 2013.

The Indian medical tourism industry is presently at a nascent stage, but has an

enormous potential for future growth and development on the back of low cost range

of treatments provided by the country. The growth in India’s medical tourism market

will be a boon for several associated industries, including hospital industry, medical

equipments industry and pharmaceutical industry.

Domestic medical tourism in the country has also seen growth in the recent years. As

per the report ‘Domestic Tourism in India, 2008-09’ released by the National Sample

Survey Office (NSSO), trips for ‘health and medical’ purposes formed 7 per cent of

overnight trips in the rural population and about 3.5 per cent in the urban population.

15

‘Health and medical’ purposes accounted for 17 per cent of same-day trips in rural

India and 8 per cent in urban India. Expenditure on medical trips accounted for 30

per cent of all overnight trip expenditure for rural India and 15 per cent for urban.

Mobile Healthcare

Computer-based bio-surveillance projects generating data about diseases and creating

databases on healthcare in rural areas are becoming popular in India with various

organisations entering into this arena.

The Indian Institute of Chemical Technology (IICT) in Hyderabad has developed a

model to forecast possible epidemics of diseases such as malaria and encephalitis in

rural Andhra Pradesh.

A recent initiative by a global consortia consisting of the Indian Institute of

Technology, Madras, the National Centre for Biological Sciences, Carnegie Mellon

University's Auton Lab, LIRNEasia, University of Alberta, Respere Lanka, Lanka

Jathika Sarvodhaya Society and the International Development Research Centre

(IDRC), called the Real Time Biosurveillance Program (RTBP), has attempted to use the

power of the mobile phone in developing a healthcare model.

Earlier, Narayana Hrudayalaya and the Mazumdar Shaw Cancer Centre tied up with

SANA, a research group at Harvard/MIT, to use smart phone-based detection of oral

cancer and other diseases.

Government Initiative

The Government launched the National Rural Health Mission (NRHM) in 2005. It aims

to provide quality healthcare for all and increase the expenditure on healthcare from

0.9 per cent of GDP to 2-3 per cent of GDP by 2012.

According to Union Budget 2011-12, Mr Pranab Mukherjee, the Finance Minister,

increased the plan allocation for health by 20 per cent to US$ 5.8 billion. Further, the

Rashtriya Swasthaya Bima Yojana will be extended to the unorganized sector workers

in hazardous mining and associated industries

In order to meet revised cost of construction, in March 2010 the government allocated

an additional US$ 1.23 billion for six upcoming AIIMS-like institutes and upgradation

of 13 existing Government Medical Colleges.

The Union Cabinet on October 20, 2010 approved the proposal of the Ministry of

Health & Family Welfare to declare National Institute of Mental Health and Neuro

16

Sciences (NIMHANS), Bangalore as an Institute of National Importance on the lines of

All India Institute of Medical Sciences, New Delhi, Post Graduate Institute of Medical

Education and Research, Chandigarh and Jawaharlal Institute of Postgraduate

Medical Education & Research, Puducherry.

________________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

17

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