Operating performance of both hospital chains were better than estimates, though Apollo’s operating metrics stood out.
While the demerger of the pharmacy business will unlock value for Apollo Hospitals, rising occupancies and operating efficiencies could boost the prospects of Max Healthcare.
Shares of Apollo have jumped 10 per cent over the past year, while Max shares fell 17.5 per cent, against a flat Nifty 50 over this period.
Apollo posted consolidated sales growth of 21 per cent Y-o-Y, driven by the hospitals segment. The segment grew 22 per cent, with established hospitals (in operation for five years) growing 18 per cent. This was led by 11 per cent volume growth in acute therapies, 4 per cent growth in pricing and 3 per cent uptick in case and payor mix.
Overall occupancy improved by 500 basis points Y-o-Y, as compared to 65 per cent in the year ago quarter. Average revenue per patient (ARPP) rose 8 per cent Y-o-Y to just under ₹186,600 due to better clinical case mix. The company expects rising clinical complexity to remain an important growth driver in ARPPs. HealthCo (pharmacy, digital operations/Apollo 24/7) saw a revenue growth of 20 per cent Y-o-Y.
Apollo expects overall hospital revenue growth of 18-20 per cent during financial year 2027 (FY27), with established hospitals sustaining 13-14 per cent growth over the next two years, while new hospitals are expected to contribute 7 per cent incremental revenue. New hospital losses may temporarily increase by ₹20 crore per quarter, with the new hospital cluster expected to approach overall break-even by Q3 or Q4 of FY28.
Max’s revenue jumped 15.3 per cent in Q1FY27, led by higher volumes and better realisation. There were 630 bed additions over the past year. The revenue growth came despite the impact of oncology drugs (regulatory changes related to high value cancer drugs). Occupancy has remained strong at 75 per cent, with 13 per cent Y-o-Y addition in beds over the past 12 months. While occupancies have remained strong, the hospital chain is adding beds through acquisitions, brownfield and greenfield expansion.
The ongoing expansion is expected to boost its bed capacity by 2,800 beds over the next two years, raising its bed capacity by half of the current level. These additions would entertain a capex outlay of ₹6,100 crore.
The operating performance of the two healthcare majors, too, was healthy with Apollo having the edge. Operating profit margin of Apollo expanded 92 basis points Y-o-Y to 15.5 per cent, driven by lower digital cash losses at ₹9.7 crore, against ₹48.7 crore in Q1FY26. Its established hospitals delivered a 25.9 per cent margin, while new hospitals reported a ₹38 crore loss at the operating level during the initial ramp-up phase.
Max reported a 15 per cent Y-o-Y growth in operating profit. Margins remained flat Y-o-Y at 24.6 per cent due to brownfield capacity expansion and Kalinga Hospital acquisition.
Analysts are positive on the two companies. On Apollo, JM Financial Research believes that in terms of growth, both key businesses (hospital & pharmacy) would sustain 18-20 per cent growth for the year. The pharmacy demerger is expected to conclude by Q4FY27, which will unlock value, according to analysts led by Amey Chalke. The brokerage has maintained a “buy” rating with a target price of ₹10,446 on the stock.
For Max, Choice Institutional Equities says that rising occupancy and average revenue per operating bed at newer facilities are projected to unlock operating leverage and operating profit growth. The Kalinga turnaround, potential medical education with 25 per cent return on capital employed (RoCE) and scaling up of Max@Home and Max Lab further support the company’s growth, pointed out Deepika Murarka and Stuti Bagadia of the brokerage. They expect a 24-27 per cent growth in revenues and profit over the next three years and have an “add” rating with a target price of ₹1,160 per share.