DCF Studio

    APOLLOHOSP.NS · NSI · Healthcare

    Apollo Hospitals Enterprise Limited

    Also onConsensus Drift

    Implied value per share

    INR 1606.47

    Market price

    INR 8944.50

    Implied upside

    -82.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 7.2% of revenue against depreciation of 3.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Current EV/EBITDA of 35.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    INR 1606.47-82.0%
    Exit multiple
    INR 5816.62-35.0%
    Market price
    INR 8944.50

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (INR). Outflows negative.

    0bn4bn9bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayINR
    LineFY27FY28FY29FY30FY31CAGR
    RevenueINR 286.1bnINR 328.6bnINR 377.3bnINR 433.4bnINR 497.7bn+14.8%
    EBITINR 28.7bnINR 32.9bnINR 37.8bnINR 43.4bnINR 49.9bn+14.8%
    NOPATINR 21.4bnINR 24.6bnINR 28.3bnINR 32.5bnINR 37.3bn+14.8%
    Add depreciation & amortisationINR 10.3bnINR 11.8bnINR 13.6bnINR 15.6bnINR 17.9bn+14.8%
    Less capital expenditureINR -20.5bnINR -23.6bnINR -27.1bnINR -31.1bnINR -35.7bn+14.8%
    Less increase in working capitalINR -6.3bnINR -7.2bnINR -8.3bnINR -9.5bnINR -10.9bn+14.8%
    Free cashflow to firmINR 4.9bnINR 5.7bnINR 6.5bnINR 7.5bnINR 8.6bn+14.8%
    Discount factor0.95280.86490.78510.71270.6470-
    Present valueINR 4.7bnINR 4.9bnINR 5.1bnINR 5.3bnINR 5.6bn+4.3%
    Present Value Of The ForecastINR 25.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.462Reported 0.197, pulled toward 1.0 (Blume)
    Cost of equity10.50%Risk-free + beta x equity risk premium
    Cost of debt6.80%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationINR 1286.1bn93.8% of capital
    Total debtINR 84.9bn6.2% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC10.16%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareINR 1606.47

    91% of EV

    Forecast FCFF, final year
    INR 8.6bn
    Capex at depreciation, working capital in reinvestment
    INR 38.5bn
    Less reinvestment at g/ROIC (18.5% of NOPAT)
    INR -7.1bn
    Capitalised
    INR 31.4bn
    ROIC (reported)
    13.5%
    Terminal value, undiscounted
    INR 420.2bn
    Terminal value, discounted
    INR 271.9bn
    Enterprise value
    INR 297.5bn
    Less net debt
    INR 66.4bn
    Equity value
    INR 231.1bn

    Exit at 20.0x EBITDA

    Value per shareINR 5816.62

    97% of EV

    Terminal value, undiscounted
    INR 1356.5bn
    Terminal value, discounted
    INR 877.6bn
    Enterprise value
    INR 903.3bn
    Less net debt
    INR 66.4bn
    Equity value
    INR 836.9bn

    Spread between methods: 113%.

    Sensitivity

    Value per share (INR) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.16%2275.102380.142502.502647.212821.48
    9.16%1847.961912.371985.442069.292166.77
    10.16%1522.521562.321606.481655.911711.80
    11.16%1267.031291.281317.621346.431378.20
    12.16%1061.691075.801090.751106.701123.80

    Outlined: this model. Green text: above today's price of 8944.50. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year14.8%61.0%+46.1pp
    EBIT margin10.0%38.3%+28.3pp
    Discount rate10.2%4.5%-5.7pp
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    Yahoo Finance and RBA data. General information, not advice. Methodology.