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Should one invest in Apollo Hospital at market price ?

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Submitted by stockguru on August 12, 2009 - 10:53

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Submitted by rakeshseth on August 13, 2009 - 00:08. #

Apollo Hospital is one of the most reasonable prices stock in Indian Healthcare sector. Although it looks expensive at p/e more then 40. But if we factor in growth in hospital and pharmacy business valuation seems to be reasonable.

Current Market Price : Rs 545
Market Cap : 3365 Crore
Sales : 1,457.98 ( year ending March 09 )
EPS : 18

Net Profit (after tax ) : 118 Cr
Cash at Hand L: 104 Cr
Cash generated by operating actvity during 09 : ???

What are risks
----------------

1. Bullding hospital is capital intensive exercise. Int rate change can cause negative affect on profitability.

2. Pharamacy business is still running losses. It's drag to company. Key to future profit is ,how company turns around its pharmacy business.

3. FII holds a major chunk (22% ) , any sell off from FII can cause damage to share price.

Why I am positive
=================

1. There is still plenty of room for hospital to grow. India with 1 Billion population provides ample opportunity .

2. Company's pharmacy business has strong potential to grow , will add substantial value to current shareholder.

3. Company planning to add 2400 Bad by 2010.
With cost of real estate and construction coming down, this provides a good opportunity for company to grow in tier II cities.

 

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