Apollo Hospitals Vs Fortis Healthcare: The Covid-19 pandemic shed light on the infrastructural capabilities of hospitals, not only in India but also in the rest of the world.
A strong health care sector is not only essential for the wellness of the people but also for strong economic growth.
In this article, we will have a look at two of the biggest players in the healthcare sector Apollo Hospitals Vs Fortis Healthcare. Keep reading to find out!
Industry Overview – Healthcare
The size of the overall Indian Healthcare market was estimated at US$ 265 Billion in 2020. Although the numbers may seem huge, like many other developing countries, India too suffers from limited healthcare infrastructure.
This is particularly because its services are inadequate to meet the demands of a large and diverse population.
The healthcare sector in India broadly includes hospitals, pharmaceutical companies & standalone pharmacies, diagnostic services, medical equipment and supplies, medical insurance, telemedicine companies, medical tourism, and retail healthcare.
The Indian government has taken a multitude of initiatives to drive the growth of the healthcare sector in the country and has been yielding positive results.
Some of the well-known schemes are Ayushman Bharat, National Health Policy (NHP) Scheme, Pradhan Mantri Swasthya Suraksha Yojana (PMSSY), and Pradhan Mantri Surakshit Matritva Abhiyan (PMSMA) out of many.
Founded in 1983, Apollo Hospitals began its journey as the country’s maiden corporate hospital.
AHEL has established Telemedicine units across 10 countries, a Global Projects Consultancy Division, Medical Colleges, Medvarsity for e-Learning, Colleges of Nursing and Hospital Management, and a Research Foundation.
Apollo’s footprint includes 10,209 beds, 4,118 pharmacies, 1175 national retail healthcare centers, and a deep online presence as of FY21. Apollo is the largest administrator of Covid vaccines in the private sector in India.
Fortis Healthcare Limited (FHL) is an Indian multinational chain of private hospitals. It started its health care operations from Mohali where the first Fortis hospital was established.
Later on, the hospital chain purchased the healthcare branch of Escorts group and increased its strength in various parts of the country.
The Fortis Hospital Network has 27 Hospitals with 4,100+ Operational beds. Their company SRL Diagnostics has a network of 425+ Labs and 2,250+ Customer touchpoints.
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Let us have a look at the financial metrics of the companies:
Apollo hospitals have a larger scale of operations than Fortis. More than 50% of their revenue is earned from Healthcare Services followed by Pharmacy Distribution with 44% and AHLL which contributes around 6%.
Its revenue has grown consistently during the pre-covid period.
Fortis Healthcare has mainly two divisions from which it earns revenue. The Healthcare services contribute around 76% to their total revenue and the rest 24% is by their Diagnostic services.
Even before the breakout of covid the company was not able to maintain a consistent revenue growth margin. Revenue (Rs in Cr) 20172018201920202021 Apollo Hospital (Rs in Cr)7,256.008,243.009,617.0011,247.0010,560.00 (Revenue growth in %)-13.61%16.67%16.94%-6.11% Fortis Hospital (Rs in Cr)4,574.004,561.004,469.004,632.004,030.00 (Revenue growth in %)-0.28%-2.01%3.65%-13.00%
The gross profit margin reflects how successful a company’s management is in generating revenue, considering the costs involved in producing their products and services.
The 5-year average gross profit margin for Apollo hospital is higher with 11.45% than Fortis with 10.59%.
Operating income shows how much a company is earning after deducting all the variable costs but before paying interest and taxes.
The 5 years average operating profit margin for Apollo is higher than Fortis with 6.7% compared to 4.83%.
The net profit margin of both companies is low. Fortis hospital has a negative net profit margin because it has made losses in the last two years. Profit Margin ratios (Rs in Cr) 20172018201920202021 Gross Profit Margin (%) Apollo Hospital10.3510.0111.3814.3511.19 Fortis Hospital11.349.057.114.2911.19 Operating Margin (%) Apollo Hospital6.025.657.278.845.76 Fortis Hospital6.483.811.897.993.98 Net Profit Margin (%) Apollo Hospital1.220.722.073.871.29 Fortis Hospital-0.15-21.65-13.161.71-2.57
How Much Are Investors Earning?
ROE shows how efficient management is at utilizing equity financing provided by shareholders. The 5-year average ROE for Apollo hospitals is 5.41% whereas Fortis has an ROE negative due to the losses incurred by them.
ROCE metric is used to measure how much the company is able to yield from the capital that is being used. Apollo hospitals have a higher ROCE than Fortis.
Apollo is a dividend-paying company whereas Fortis healthcare does not pay dividends to its shareholders. Return ratios (Rs in Cr) 20172018201920202021 Return On Equity (ROE) Apollo Hospital2.681.816.0713.083.44 Fortis Hospital-0.15-21.56-11.091.2-1.62 Return On Capital Employed (ROCE) Apollo Hospital6.947.1210.2417.139.32 Fortis Hospital4.43-10.57-1.895.212.1 Earnings Per Share (EPS) Apollo Hospital1.590.841.73.271.05 Fortis Hospital0.08-0.19-0.040.01-0.01 Dividend Yield Apollo Hospital0.510.470.490.530.1 Fortis Hospital00000
How Does The Valuation Of The Company Look?
The PE ratio shows the valuation of the company by comparing its earnings per share with the current market price per share. Apollo has a positive and higher PE ratio than Fortis. This is because the latter is a loss-making company.
The EV/EBITDA valuation metric is used by investors to measure the value of a company, debt included, to the company’s cash earnings less non-cash expenses. Generally, the stock with a lower ratio is considered ideal. Valuation Parameter (Rs in Cr) 20172018201920202021 Price to Earnings Ratio (PE) Apollo Hospital73.45125.9172.0234.82277.55 Fortis Hospital22.1100164.260 Price to Book Value (P/B) Apollo Hospital4.924.565.114.769.1 Fortis Hospital1.821.591.561.432.46 EV/EBITDA Apollo Hospital25.0821.5618.5611.7537.11 Fortis Hospital21.1919.7235.7916.0135.21
Share Holding Pattern of the company
Future Prospects Of The Company
Apollo Hospitals Enterprise Ltd: The company has plans to invest in digitization and innovation. They have launched programs such as Apollo ProHealth which is a proactive and personalized health management system using AI and analytics.
Fortis Healthcare Ltd: The Company is progressing towards one integrated platform across all hospitals vis-à-vis the present diverse legacy systems.
These are aimed at creating a singular view of a patient irrespective of which Fortis Hospital the patient visits. For SRL, the company is focused on a new vision to make its diagnostics solutions more innovative and high quality.
The sector has been allocated Rs 86,200.65 crore in the Union Budget 2022-23. This is a hike of 16 percent over Rs 73,931 crore in 2021-22.
This will not only provide opportunities to people but also scale up the operations of the business. That’s all for this post on Apollo Hospitals Vs Fortis Healthcare. Happy investing!
Have you invested in either of the companies? Let us know in the comments.
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