PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

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1 BUY CMP Target Price APOLLO HOSPITALS ENTERPRISE LTD Result Update: Q3 FY14 FEBRUARY 13 th 2014 ISIN: INE437A01024 Index Details Stock Data Sector Healthcare BSE Code Face Value wk. High / Low (Rs.) / Volume (2wk. Avg.) Market Cap (Rs. in mn.) Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY13A FY14E FY15E Net Sales EBITDA Net Profit EPS P/E Shareholding Pattern (%) 1 Year Comparative Graph APOLLO HOSPITALS ENTERPRISE LTD S&P BSE SENSEX SYNOPSIS Apollo Hospitals Enterprise Ltd (AHEL) provides healthcare services primarily in India, Mauritius, and Bangladesh. The company s net profit jumps to Rs million against Rs million in Q3 FY13, an increase of 3.49%. Revenue for the quarter rose by 16.07% to Rs million from Rs million, when compared with the prior year period. EBITDA (excluding other income) was higher by 7.8% from Rs million in Q3 FY13 to Rs million in Q3 FY14. Revenues of the hospital division increased by 13% to Rs. 6,363 million in Q3 FY14 compared to Rs. 5,653 million in Q3 FY13. Apollo Pharmacies revenues grew by 23% from Rs. 2,905 million in Q3 FY13 to Rs. 3,571 million in Q3 FY14. During the quarter, Apollo Pharmacies added 35 stores and closed 9 stores for a net addition of 26 stores total store network as of December 31 stands at 1,586 operational stores. Apollo Hospitals to be added 8 hospitals (Over 1,000 beds) in FY15. Apollo Hospitals signed a MoU with Ministry of Communication and Information Technology to introduce telemedicine centers in Rural India. Apollo s major clusters in Chennai and Hyderabad reported yoy revenue growth of 12% and 11%, respectively, for 9M FY14. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 16% over 2012 to 2015E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Apollo Hospital Enterprise Ltd Fortis Healthcare Ltd Indraprastha Medical Corporation Ltd Opto Circuits India Ltd

2 Recommendation & Analysis - BUY Apollo Hospitals Enterprise Ltd (AHEL), the Healthcare Pioneer and leading provider of quality clinical care has reported its revenue for the quarter grew by 16.1% at Rs million compared to Rs million in Q3 FY13. EBITDA (excluding other income) was higher by 7.8% from Rs million in Q3 FY13 to Rs million in Q3 FY14. PAT increased by 3.5% to Rs. 834 million in Q3 FY14. AHEL has launched 3 new hospitals in the last 12 months - a 200 bed Multispecialty hospital at Vanagaram - Ayanambakkam, Chennai; a 140 bed Ortho and Spine Specialty Hospital at Jayanagar, Bangalore and a 200 bed Specialty Hospital in Trichy. Excluding the impact of the initial operating losses of these new facilities, AHEL reported an 11.5% (yoy) rise in EBITDA to Rs. 1,632 million in Q3 FY14. Healthcare Services (existing hospitals) reported EBITDA margins of 24.3% in Q3 FY14 as compared to 24.5% in Q3 FY13 while Standalone pharmacies further improved in EBITDA margins further to 3.4% from 2.7% in Q3 FY13. Apollo Hospitals to be added 8 hospitals (Over 1,000 beds) in FY15. Nellore (200 beds), Nasik (125 beds) and Indore (120 beds) to be operational by Q1 FY15. Over FY E, we expect the company to post a CAGR of 16% and 16% in its top-line and bottom-line respectively. Hence, we recommend BUY for Apollo Hospitals Enterprise Ltd with a target price of Rs on the stock. QUARTERLY HIGHLIGHTS (STANDALONE) Results updates- Q3 FY14, Apollo Hospitals Enterprise Ltd is India s first and largest branded pharmacy network, with over 1,350 outlets in key locations, reported its financial results for the quarter ended 31 st Dec, Months Dec-13 Dec-12 % Change Net Sales PAT EPS PBIDT The company s net profit jumps to Rs million against Rs million in the corresponding quarter ending of previous year, an increase of 3.49%. Revenue for the quarter rose by 16.07% to Rs million from Rs million, when compared with the prior year period. Reported earnings per share of the company stood at Rs a share during the quarter, registering 3.49% increase over previous year period. Profit before interest, depreciation and tax is Rs millions as against Rs millions in the corresponding period of the previous year.

3 Break up of Expenditure Break up of Expenditure Value in Rs. Million Q3 FY14 Q3 FY13 Cost of Material Consumed Purchase of Stock in Trade Employee Benefit Expenses Depreciation & Amortization Expenses Other Expenditure Selling & Distribution Expenses Segment Revenue Segment wise Performance Hospitals Revenues of the hospital division of Apollo Hospitals Enterprise Ltd (Standalone) (consisting of hospital services, hospital-based pharmacies and consulting) increased by 13% to Rs. 6,363 million in Q3 FY14 compared to Rs. 5,653 million in Q3 FY13.

4 Apollo s major clusters in Chennai and Hyderabad reported yoy revenue growth of 12% and 11%, respectively, for 9M FY14. The Hyderabad cluster has reported improved occupancy of 628 beds (68% utilization on 930 beds) in 9M FY14 as compared to 618 beds (66%) in 9M FY13. Apollo s newer hospitals continued to display steady progress and improvement in operating parameters: Bhubaneswar occupancy at 209 beds (84% utilization on an increased capacity of 250 beds) as compared to 185 beds in 9M FY14. Hospitals in tier II cities in Mysore and Madurai demonstrated continued improvement in EBITDA margins on the back of sustained revenue growth. Hospitals at Karur and Karaikudi have reported positive EBITDA in 9M FY14 compared with a negative EBITDA in the same period last year. In addition to the sustained performance by the existing Standalone hospitals, AHEL reported robust growth in consolidated revenues on the basis of the performance by key Subsidiary & Associate Hospitals at Kolkata, Delhi, Ahmedabad and Bangalore. All four subsidiaries reported double digit revenue growth on a y-on-y basis. EBITDA growth was higher than revenue growth resulting in improved margins with Ahmedabad reporting highest growth in EBITDA. Pharmacies During the quarter, Apollo Pharmacies added 35 stores and closed 9 stores for a net addition of 26 stores total store network as of December 31 stands at 1,586 operational stores. Revenues grew by 23% from Rs. 2,905 million in Q3 FY13 to Rs. 3,571 million in Q3 FY14. Operational performance improved further as EBITDA grew by 56.6% from Rs. 78 million in Q3 FY13 to Rs. 122 million in Q3 FY14. Same-store sales remained healthy with like-for-like growth in revenue per store for the batch of stores opened prior to March 2008 at 12% for Q3 FY14. The EBITDA margin for mature stores (pre March 2008) was higher by 36 basis points from 5.4% in Q3 FY13 to 5.8% in Q3FY14. Apollo Munich Health Insurance Company Limited During 9M FY14, Total Income increased by 23% to Rs. 4,319 millions from Rs. 3,500 million in 9M FY13. The incurred claim loss ratio was 66.5% in 9M FY14 compared to 60.5% in 9MFY13. The business reported a loss at the net level of Rs. 234 million in 9M FY14 compared to a loss of Rs. 56 million in 9M FY13.

5 Latest Updates Apollo Hospitals signed a MoU with Ministry of Communication and Information Technology to introduce telemedicine centers in Rural India. 51 hospitals with total bed capacity of 8,488 beds as on Dec 31, owned hospitals including JVs/ Subsidiaries and associates with 6,600 beds and 12 Managed hospitals with 1,888 beds The total number of pharmacies as on Dec 31, 2013 was 1,586. Gross additions of 135 stores with 52 stores closures thereby adding 83 stores on a net basis. Surgeons at Apollo Hospitals Chennai successfully separated Tanzanian Pygopagus conjoined Twins Ericana & Eluidi and created history in the medical field first time in Asia. COMPANY PROFILE Apollo Hospitals Enterprise Limited (AHEL) was incorporated as a Public Limited Company in the year Promoted by Dr. Prathap C Reddy, it is the first group of hospitals that pioneered the concept of corporate healthcare delivery in India. AHEL today, is the leading private sector healthcare provider in Asia and owns and manages a network of specialty hospitals and clinics, a chain of Pharmacy retail outlets across the country, and provides Consultancy Services for commissioning and managing the Specialty Hospitals. Apollo Hospitals has also played a pioneering role in helping India become a center-of-excellence in global healthcare. The Apollo Hospitals group today includes over 10,000 beds across 61 hospitals, more than 1,500 pharmacies, over 100 primary care and diagnostic clinics, 115 telemedicine units across nine countries, health insurance services, global projects consultancy, 15 academic institutions and a Research Foundation with a focus on global clinical trials, epidemiological studies, stem-cell and genetic research. Apollo Hospitals Group had become an integrated healthcare organization with owned and managed hospitals, diagnostic clinics, dispensing pharmacies and consultancy services. In addition, the group's service offerings include healthcare at the patient's doorstep, clinical & diagnostic services, medical business process outsourcing, third party administration services and health insurance.

6 Services offered Cardiology & Cardiothoracic Surgery Orthopedics & Joint Replacement Surgery Spine Surgery Oncology Medical & Surgical Gastroenterology Neurology & Neurosurgery Nephrology & Urology Cancer Care Primary Care Clinics Clinical Research & Site Management Owned & Managed Hospitals. Robotic surgery

7 FINANCIAL HIGHLIGHT (STANDALONE) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31st, E AHEL. FY12A FY13A FY14E FY15E SOURCES OF FUNDS (Rs.in.mn) Shareholder's Funds Share Capital Reserves and Surplus Money received against share warrants Sub Total - Net worth Non Current Liabilities Long term borrowings Deferred Tax Liabilities Other Long Term Liabilities Sub Total - Non Current Liabilities Current Liabilities Short Term Borrowings Trade Payables Other Current Liabilities Short Term Provisions Sub Total - Current Liabilities Total Liabilities (1+2+3) APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets Intangible assets Capital Work in Progress Intangible Assets under Development a) Sub Total - Fixed Assets b) Non-Current Investment c) Long Term loans and advances Sub Total - Non Current Assets Current Assets Current Investment Inventories Trade receivables Cash and Bank Balances Short-terms loans & advances Other current assets Sub Total - Current Assets Total Assets (1+2)

8 Annual Profit & Loss Statement for the period of 2012 to 2015E Value(Rs.in.mn) FY12A FY13A FY14E FY15E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Profit After Tax Extraordinary Items Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 30 th June, 2013 to 31 st March, 2014E Value(Rs.in.mn) 30-Jun Sep Dec Mar-14E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS

9 Ratio Analysis Particulars FY12A FY13A FY14E FY15E EPS (Rs.) EBITDA Margin (%) 17.58% 17.62% 16.68% 16.89% PBT Margin (%) 12.05% 12.16% 10.95% 10.92% PAT Margin (%) 8.25% 9.18% 8.61% 8.30% P/E Ratio (x) ROE (%) 9.98% 11.17% 10.88% 10.51% ROCE (%) 20.30% 19.12% 18.82% 19.25% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Charts

10 OUTLOOK AND CONCLUSION At the current market price of Rs , the stock P/E ratio is at x FY14E and x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 16% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at x for x respectively for FY14E and FY15E. Price to Book Value of the stock is expected to be at 4.25 x and 3.80 x respectively for FY14E and FY15E. We recommend BUY in this particular scrip with a target price of Rs for Medium to Long term investment. INDUSTRY OVERVIEW The Indian healthcare industry, which comprises hospitals, medical infrastructure, medical devices, clinical trials, outsourcing, telemedicine, health insurance and medical equipment, is expected to reach US$ 160 billion by India's healthcare system is developing rapidly and continues to expand its coverage, services and expenditure in the public as well as private sectors. This is creating a large market for hospital information systems and other healthcare-related IT solutions.

11 Market Size The hospital and diagnostics centre in India received foreign direct investment (FDI) worth US$ 2, million, while drugs & pharmaceutical and medical & surgical appliances industry registered FDI worth US$ 11, million and US$ million, respectively during April 2000 to September 2013, according to Department of Industrial Policy and Promotion (DIPP). The Indian medical device and equipment market is expected to grow to around US$ 5.8 billion by 2014 and US$ 7.8 billion by 2016, growing at a compound annual growth rate (CAGR) of 15.5 per cent. India s medical device market is currently the fourth largest in Asia with 700 medical device makers, and ranks among the top 20 in the world, as per data from India Semiconductor Association. On the back of continuously rising demand, the hospital services industry is expected to be worth US$ 81.2 billion by In addition, the Indian hospital services sector revenue is expected to increase at a CAGR of 20 per cent during the period , generating immense possibilities for players in the market. Trends and Investments The Indian healthcare providers plan to spend Rs 5,700 crore (US$ million) on IT products and services in 2013, a 7 per cent rise over 2012 revenues worth Rs 5,300 crore (US$ million), as per a report by Gartner. Initiating a new era of quality health facility, telemedicine services were launched by Mr Nitish Kumar, Chief Minister of Bihar, in Patna-based prominent hospitals and those in 22 districts and 82 primary health centres of Bihar. The Amrita Centre for Nanosciences and Molecular Medicine has developed a nano-medicine that, it claims, will dramatically improve the treatment of drug-resistant chronic myeleogenous leukemia (CML, a form of blood cancer), when used in combination with Imatinib, the standard drug for CML. The following are some of the major investments in the sector: Trivitron Healthcare has joined hands with India Value Fund Advisors (IVFA) to finance its next phase of growth. IVFA has invested Rs 150 crore (US$ million) for a minority stake in the company. IDFC Alternatives has invested Rs 125 crore (US$ million) in Medi Assist Healthcare, a development that continues to reiterate risk capital's strong focus on the sector. Cadila Pharmaceuticals Ltd (CPL) has decided to invest another Rs 100 crore (US$ million) on expansion, upgradation and modernisation of its manufacturing unit at Samba in Jammu district.

12 Apollo Hospitals and Medtronic Inc are to collaborate to bring an innovative, affordable and portable haemodialysis system in India that can help improve access to care for end stage renal disease (ESRD) patients who need renal replacement therapy. Medtronic intends to develop and manufacture key components of this haemodialysis system in India which will be ready for commercial launch in 2016, the companies said in a joint statement. Medical Tourism The industry in India is also expected to record revenue worth US$ 1 billion per annum, growing at around 18 per cent and is expected to touch US$ 2 billion by India has witnessed an influx of patients from Africa, CIS countries, Gulf and SAARC nations, Pakistan, Bangladesh and Myanmar, who mainly come for organ transplant, orthopedic, cardiac and oncology problems. Kerala has the potential to become the hub and most preferred destination for health tourism with highly qualified doctors and some of the best hospitals and resorts in the country, highlighted Mr Oommen Chandy, Chief Minister, Kerala. Furthermore, Mr A P Anil Kumar, the State Tourism Minister, pointed that Kerala is the fastest growing tourism destination in India. Last year, 1 million foreign and 10 million domestic tourists visited the state. Government Initiatives The Republic of Hungary has signed a bilateral agreement with India for promotion and development of traditional systems of medicine. The memorandum of understanding (MoU) will boost bilateral cooperation between the two countries in the areas of traditional medicines, which will open new vistas for exploring the potential of economic, commercial and tourism development in both the countries. The Government of India has allocated Rs 3,000 crore (US$ million) in the 12th Five-Year Plan ( ) for development of the medical device sector according to Drugs Controller of India. With medical devices to be brought under the ambit of the Drugs and Cosmetics (Amendment) Bill, 2013, the Government is looking to strengthen its infrastructure to oversee this sector. Moreover, 100 per cent FDI is permitted for health and medical services under the automatic route. Also, the Department of Health Research has decided to set up a Medical Technology Assessment Board to evaluate all kinds of Medical Technologies.

13 Road Ahead India is a land full of opportunities for players in the medical devices industry. The country has also become one of the leading destinations for high-end diagnostic services with tremendous capital investment for advanced diagnostic facilities, thus catering to a greater proportion of population. Besides, Indian medical service consumers have become more conscious towards their healthcare upkeep. The diagnostic lab services have been witnessing an increase in the number laboratory tests being outsourced to India. The coming years will see a rise in the share of the organised players in the diagnostic services market. The favourable demographic virtues offer an attractive market for healthcare providers and investors in India. Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it s affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.

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