Apollo Hospitals – A Solid Core with a Powerful Value Unlock

Apollo Hospitals Rs 7550

Hospitals in India have a long growth runway – under-penetration, rising incomes, government support, no import competition, no tariff threats even, which makes it a rare sector with just healthy tailwinds. In a world full of geopolitical hurdles, this is one place where growth needs no visa.

Apollo Hospitals (AHEL) is India’s largest and among the most trusted hospital chains, and it’s not just running a steady healthcare business — it’s also on the verge of unlocking significant shareholder value.

Core Hospitals – The Engine That Keeps Delivering

At the heart of Apollo’s business is its hospital network: 51 owned/managed hospitals with nearly 8800 operational beds, of which about 60% are in metro cities. These are highly profitable assets and they make up the bulk of Apollo’s profits – 51% of revenue, 89% of EBITDA and 99% of PAT in FY25

Importantly, this core hospital vertical is completely debt-free, highly cash-generative, and continues to grow steadily. FY25 was particularly strong — revenue grew 14%, EBITDA jumped 26%, and PAT surged 61% to ₹1446 crore.

Apollo is planning to expand capacity by adding ~3577 beds over 4 years, with a capex plan of ₹7600 crore. About ₹2100 crore is already done, and the rest will be funded entirely through internal accruals — no need for fresh debt.

Big Move: Demerger of Non-Hospital Verticals

In June 2025, Apollo announced a strategic demerger. Its pharmacy and diagnostics businesses — including Apollo HealthCo (offline + online pharmacy, Keimed) and AHLL (clinics and diagnostics) — will be spun off into a new listed company.

This new platform is massive: 7000 stores, presence in 19,000 pin codes, plus diagnostics and telemedicine. Management projects revenue to rise from ₹16,267 crore in FY25 to ₹25,000 crore in FY27, and EBITDA margins to double to 7% — that’s an EBITDA of ~₹1750 crore by FY27.

Assigning a conservative 20x multiple, this translates to a valuation of ₹35,000 crore, or ₹500+ per share in the new entity (Apollo shareholders will get 195.2 shares of the new entity for every 100 shares held in the consolidated entity). That’s a clear ₹1000+ per share of additional value on top of the current price (~₹7500) — just from the demerger.

Track Record + Growth Visibility

Apollo’s fundamentals are rock-solid – Past 10, 5, 3 Year Revenue/EBITDA/PAT CAGR has been ~16%/15%/16%, 14%/14%/37%, 14%/11%/20%. ROE has improved from 11% to ~20%

With organic growth guidance in the low teens, and additional 5–7% CAGR from bed additions, management is aiming for mid-teen growth — a very achievable target given their track record.

Valuation – Looks Reasonable

After discounting the new entity’s value, which comes to ~28000 crore at 12% discount rate, from consolidated entity’s market cap of 1.08 lac crore, the resultant core hospital valuation of ~80000 crore looks attractively valued — especially compared to listed peers.

Bottom Line

The stock might consolidate in the short term, but for long-term investors, the reward-to-risk looks clearly skewed to the upside. It’s a classic “own the compounder, benefit from the demerger” play.