Posted on February 11, 2025, by Niftynews
Apollo Hospitals shares saw a significant drop of over 7% on February 11, despite reporting better-than-expected earnings for the third quarter (Q3) of the financial year. The hospital major’s Q3 result showed impressive growth in net profit and revenue, yet the stock faced heavy selling pressure, exacerbated by high trading volumes and the build-up of short positions.
Apollo Hospitals shares were trading at ₹6,329.50 on the National Stock Exchange (NSE), marking a 6.20% decline for the day. Despite the negative stock performance, the company’s Q3 earnings highlighted an overall positive performance, driven by strong growth in its healthcare services and the improvement in operational efficiency.
Apollo Hospitals Q3 Result: A Positive Show Despite Stock Decline
For the quarter ending December 2024, Apollo Hospitals Q3 result showcased a robust financial performance. The company reported a 52% jump in net profit, which surged to ₹372.3 crore, surpassing analysts’ expectations of ₹347 crore. The strong performance was primarily driven by a 14% increase in revenue, which stood at ₹5,527 crore, in line with analysts’ consensus of ₹5,575 crore.
- Net Profit: ₹372.3 crore (up 52% YoY)
- Revenue: ₹5,527 crore (up 14% YoY)
The company’s Apollo Health & Lifestyle Ltd (AHLL) and Apollo Healthco segments delivered a solid 15% growth, contributing significantly to the overall revenue boost. The flagship healthcare services segment also posted a 13% year-on-year growth, further strengthening the company’s overall performance.
Operational Improvement and Margin Expansion
Apart from strong top-line growth, Apollo Hospitals also saw operational improvement, especially in its digital pharmacy business—Apollo 24/7. The company reported a reduction in losses from this segment, which contributed to the 13.8% EBITDA margin in Q3 FY25, surpassing expectations. The margin was also an improvement from 13% in the same quarter last year.
This improvement in operational performance was coupled with Apollo HealthCo’s fifth consecutive quarter of being EBITDA positive, a milestone that further highlights the growing strength of its diversified healthcare services.
Stock Market Reaction and Trading Volumes
Despite the positive Apollo Hospitals Q3 result, Apollo Hospitals shares were the worst performers on the Nifty 50 index on February 11. As much as 8 lakh shares changed hands, well above the one-month daily average of 3 lakh shares, which suggests heightened investor activity. The stock’s negative movement came amid concerns about Apollo 24/7’s gross merchandise value (GMV) growth moderation.
On the derivatives front, open interest in Apollo Hospitals shares surged by over 16%, indicating a sharp build-up of short positions. This further intensified the selling pressure on the stock, contributing to the overall decline.
Outlook and Guidance for Apollo Hospitals Shares
Despite the sell-off in Apollo Hospitals shares, the company remains optimistic about sustaining its growth trajectory. In a recent interaction with CNBC-TV18, Suneeta Reddy, Managing Director of Apollo Hospitals, shared that the company is projecting an 8% full-year growth in Average Revenue Per Occupied Bed (ARPOB). The ARPOB is expected to sustain at ₹60,000 per bed, growing at a steady rate of 4%.
Apollo Health & Lifestyle is also on track to break even by Q1 FY26, with sustainable margins expected to reach 15%, further bolstering investor confidence.
Additionally, Morgan Stanley, which holds an overweight rating on Apollo Hospitals, has set a target price of ₹8,159 for the stock. While acknowledging that Apollo 24/7’s cash losses have reduced quarter-on-quarter, they also noted that the moderation in GMV growth could raise some questions among investors. A detailed post-earnings call with management later today is expected to provide more insights into the company’s strategy and future outlook.
Conclusion: Navigating Through Short-Term Volatility
Despite the strong Q3 performance, Apollo Hospitals shares have faced significant selling pressure amid heavy trading volumes and increased short positions. Investors are closely watching the company’s performance in Apollo 24/7 and the GMV growth moderation, which could play a crucial role in the stock’s short-term movement.
Nonetheless, Apollo Hospitals remains a key player in India healthcare industry, with strong revenue growth and operational improvements. Investors should keep an eye on how the company addresses its digital pharmacy segment’s performance and if its growth can be sustained in the coming quarters. While the stock might experience volatility in the short term, Apollo Hospitals shares have long-term potential, especially as the company continues to expand and optimize its healthcare offerings.
