Following the results announcement, the stock has shown modest momentum, trading at ₹7,220.00 as of February 10, 2026, representing a 1.90% gain over the past week, though it remains 10.85% below its 52-week high of ₹8,099.00. With institutional investors holding 65.27% of the equity and the company maintaining its leadership position in the hospital sector, the quarter's performance underscores both the operational strength and valuation challenges facing long-term investors.
The quarter's performance comes against a backdrop of sustained revenue momentum, with net sales reaching an all-time quarterly high of ₹6,303.50 crores, marking the seventh consecutive quarter of year-on-year revenue growth above 12%. This operational strength reflects the company's ability to capitalise on India's growing healthcare demand whilst maintaining pricing power across its network of hospitals spanning Chennai, Hyderabad, Delhi, and other major metropolitan centres.
| Quarter | Net Sales (₹ Cr) | QoQ Growth | YoY Growth | Operating Margin | Net Profit (₹ Cr) | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 6,303.50 | +7.90% | +12.78% | 14.93% | 477.20 | 7.84% |
| Jun'25 | 5,842.10 | +4.47% | +14.88% | 14.58% | 432.80 | 7.55% |
| Mar'25 | 5,592.20 | +1.18% | +13.11% | 13.76% | 389.60 | 7.41% |
| Dec'24 | 5,526.90 | -1.12% | N/A | 13.78% | 372.30 | 6.86% |
| Sep'24 | 5,589.30 | +9.90% | N/A | 14.59% | 378.80 | 7.08% |
| Jun'24 | 5,085.60 | +2.87% | N/A | 13.27% | 305.20 | 6.20% |
| Mar'24 | 4,943.90 | N/A | N/A | 12.96% | 253.80 | 5.23% |
Financial Performance: Margin Expansion Drives Bottom-Line Growth
Apollo Hospitals' Q3 FY26 financial performance demonstrated the company's ability to translate revenue growth into superior profitability expansion. Net sales of ₹6,303.50 crores represented a sequential increase of 7.90% from Q2 FY26's ₹5,842.10 crores and a year-on-year surge of 12.78% from Q3 FY25's ₹5,589.30 crores. This acceleration in top-line growth reflected higher patient volumes across the hospital network, improved average revenue per occupied bed, and contributions from recently commissioned capacity.
The standout feature of the quarter was the operating margin expansion, with PBDIT margin (excluding other income) reaching 14.93%, up from 14.58% in the previous quarter and 14.59% in the year-ago period. This 35 basis points sequential improvement translated to operating profit of ₹941.10 crores, marking the highest quarterly operating profit in the company's recent history. The margin enhancement stemmed from better operating leverage as fixed costs were spread over a larger revenue base, alongside disciplined cost management in employee expenses and other operational areas.
Net profit after tax advanced to ₹487.70 crores (standalone basis) in Q3 FY26, whilst consolidated net profit reached ₹477.20 crores, representing year-on-year growth of 25.98%. The PAT margin expanded to 7.84%, up from 7.55% in the preceding quarter, reflecting the company's improving earnings quality. The tax rate of 26.78% in the quarter remained within the normalised range, though it was slightly higher than the previous quarter's 24.32%, contributing to some moderation in post-tax profit growth relative to operating profit expansion.
Employee costs, a significant expense category for hospital operators, rose to ₹766.70 crores in Q3 FY26 from ₹712.60 crores in Q2 FY26, representing 12.16% of net sales compared to 12.20% in the prior quarter. This marginal improvement in employee cost ratio despite higher absolute expenses demonstrated the company's ability to achieve productivity gains even as it continues to expand its medical and support staff to service growing patient volumes.
Earnings Quality: Strong Operating Cash Generation
For the full year FY25, Apollo Hospitals generated operating cash flow of ₹2,136 crores, representing a 11.25% increase from the previous year's ₹1,920 crores. This robust cash generation capability, exceeding reported profit after tax of ₹1,472 crores, underscores the high quality of the company's earnings and its ability to convert accounting profits into actual cash flows. The company's working capital management showed some pressure with changes in working capital absorbing ₹603 crores during FY25, though this was offset by strong operational performance.
Operational Excellence: Return Ratios Signal Improving Capital Efficiency
Apollo Hospitals' operational metrics in recent quarters have demonstrated improving capital efficiency, with return on equity (ROE) reaching 18.39% in the latest period, the highest level in recent years and significantly above the historical average of 14.68%. This enhancement in ROE reflects both improved profitability and efficient deployment of shareholder capital. The company's return on capital employed (ROCE) similarly advanced to 17.91%, surpassing the five-year average of 15.96% and indicating management's success in generating superior returns from the total capital base.
The improvement in return ratios assumes particular significance given the capital-intensive nature of the hospital business. Apollo Hospitals has consistently invested in expanding and upgrading its infrastructure, with capital expenditure remaining elevated. For FY25, the company deployed ₹3,380 crores in investing activities, primarily directed towards capacity expansion, medical equipment upgrades, and technology enhancement. Despite this substantial capital deployment, the company has managed to improve its return metrics, suggesting that recent investments are beginning to contribute meaningfully to profitability.
Key Operational Strength: The company's EBIT to interest coverage ratio averaged 4.23 times over recent periods, providing a comfortable cushion for debt servicing. More impressively, in Q3 FY26, the operating profit to interest ratio reached 8.59 times, the highest in recent quarters, reflecting both improved operational performance and disciplined financial management.
Balance sheet quality has strengthened progressively, with the company reducing its net debt to equity ratio from higher levels in previous years. As of March 2025, shareholder funds stood at ₹8,212.30 crores, up 18.41% from the previous year's ₹6,935.40 crores, whilst long-term debt increased to ₹4,417 crores from ₹2,235.60 crores. The debt to EBITDA ratio of 2.39 times, whilst elevated for a hospital operator, has been trending favourably, with the latest calculation showing a ratio of 1.48 times, indicating improved deleveraging capacity.
The company's asset utilisation efficiency, measured by sales to capital employed ratio of 1.44 times on average, reflects the capital-intensive nature of hospital operations. However, the consistent improvement in this metric over recent periods, coupled with expanding margins, suggests that Apollo Hospitals is successfully extracting better returns from its asset base. The company's fixed assets increased to ₹8,520.10 crores as of March 2025 from ₹7,686.20 crores a year earlier, representing ongoing investments in capacity expansion across key markets.
Healthcare Demand Dynamics: Riding India's Structural Growth Wave
Apollo Hospitals operates in an industry characterised by robust structural tailwinds. India's healthcare sector continues to benefit from rising incomes, increasing health awareness, growing insurance penetration, and favourable demographics. The hospital sector, in particular, has witnessed strong demand for quality tertiary care services, with patients increasingly willing to pay premium prices for superior medical outcomes and patient experience.
The company's leadership position in the private hospital sector provides significant competitive advantages. With a pan-India network spanning major metropolitan centres and tier-2 cities, Apollo Hospitals benefits from brand recognition, referral networks, and the ability to attract top medical talent. The hospital sector's high barriers to entry—including substantial capital requirements, regulatory approvals, and the time needed to build medical expertise—provide incumbent operators like Apollo Hospitals with sustainable competitive moats.
| Metric | FY25 | FY24 | FY23 | FY22 | 5Y CAGR |
|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 21,794.00 | 19,059.00 | 16,612.00 | 14,662.00 | 16.66% |
| Operating Profit (₹ Cr) | 3,021.00 | 2,390.00 | 2,049.00 | 2,185.00 | 37.14% |
| Operating Margin % | 13.9% | 12.5% | 12.3% | 14.9% | — |
| Net Profit (₹ Cr) | 1,472.00 | 917.00 | 887.00 | 1,101.00 | — |
| PAT Margin % | 6.8% | 4.8% | 5.3% | 7.5% | — |
The company's five-year compound annual growth rate (CAGR) of 16.66% in net sales and an impressive 37.14% in operating profit underscores its ability to capitalise on sector growth whilst simultaneously improving operational efficiency. This divergence between revenue and profit growth rates highlights the significant operating leverage inherent in the hospital business model, where incremental revenues flow through to profits at higher margins once fixed costs are absorbed.
Industry Leadership: Premium Valuation Reflects Market Position
Apollo Hospitals commands a premium valuation relative to its hospital sector peers, trading at 62.09 times trailing twelve-month earnings compared to the sector average. This valuation premium reflects the company's market leadership, superior scale, brand equity, and track record of consistent execution. However, it also raises questions about the sustainability of such elevated multiples, particularly in a rising interest rate environment where investors typically demand higher risk premiums.
| Company | Market Cap (₹ Cr) | P/E (TTM) | P/BV | ROE % | Debt/Equity | Div Yield % |
|---|---|---|---|---|---|---|
| Apollo Hospitals | 1,03,698 | 62.09 | 11.42 | 14.68 | 0.53 | 0.26 |
| Max Healthcare | — | 68.11 | 9.88 | 12.01 | 0.28 | 0.15 |
| Fortis Healthcare | — | 66.83 | 7.14 | 7.20 | 0.29 | 0.11 |
| Narayana Hrudayalaya | — | 43.08 | 9.03 | 24.25 | 0.13 | 0.25 |
| Global Health | — | 53.73 | 8.23 | 15.69 | -0.07 | 0.04 |
| Aster DM Healthcare | — | 80.46 | 6.59 | 18.66 | 0.18 | 0.85 |
Whilst Apollo Hospitals' P/E ratio of 62.09 times sits in the middle of the peer range, its price-to-book value of 11.42 times represents a significant premium to most competitors, with only Max Healthcare commanding a comparable P/BV multiple. This elevated P/BV ratio reflects the market's confidence in the company's ability to generate superior returns on equity, though the current ROE of 14.68% (five-year average) lags behind peers like Narayana Hrudayalaya (24.25%) and Aster DM Healthcare (18.66%).
The company's debt-to-equity ratio of 0.53 positions it in the middle of the peer group, indicating moderate financial leverage. Whilst this provides some financial flexibility for future expansion, it also means the company must continue generating strong cash flows to service its debt obligations. The dividend yield of 0.26% remains modest, reflecting management's preference to retain capital for growth investments rather than distribute it to shareholders—a strategy appropriate for a company in expansion mode.
Valuation Analysis: Stretched Multiples Test Investment Thesis
At the current market price of ₹7,220.00, Apollo Hospitals trades at demanding valuation multiples that embed high expectations for future growth and profitability. The P/E ratio of 62.09 times trailing earnings significantly exceeds historical averages and implies that investors are pricing in sustained double-digit earnings growth over the medium term. The company's PEG ratio of 1.50 suggests that whilst the valuation appears elevated in absolute terms, it may be justified if the company can deliver on its growth trajectory.
The enterprise value to EBITDA multiple of 32.69 times and EV to capital employed ratio of 7.80 times provide additional perspective on valuation. The EV/EBITDA multiple, whilst high, reflects the quality of the company's earnings and its market leadership position. The EV to capital employed ratio of 7.80 times, considered attractive by the company's proprietary scoring system, suggests that the market is paying a reasonable price relative to the total capital deployed in the business, particularly given the improving ROCE of 17.91%.
The stock's 52-week price range of ₹6,002.15 to ₹8,099.00 illustrates the volatility inherent in high-multiple growth stocks. Currently trading 10.85% below its 52-week high but 20.29% above its 52-week low, the stock occupies a middle ground that offers neither compelling value nor extreme overvaluation. The recent valuation grade change to "Attractive" from "Fair" in early November 2025 reflects the company's operational improvements and margin expansion, though investors must weigh this against the absolute level of multiples.
Book value per share of ₹570.55 provides a tangible asset backing that, when compared to the current market price, yields the P/BV multiple of 11.42 times. For a capital-intensive hospital business, this premium to book value can be justified only if the company continues to generate returns on equity well above its cost of capital. The latest ROE of 18.39% provides some comfort in this regard, though sustainability of this elevated return level remains a key question for long-term investors.
Shareholding: Institutional Confidence Remains Robust
Apollo Hospitals' shareholding pattern reveals strong institutional participation, with foreign institutional investors (FIIs) and mutual funds collectively holding 60.29% of the equity as of December 2025. This substantial institutional ownership provides liquidity support and reflects professional investors' confidence in the company's long-term prospects. However, the recent quarterly changes in shareholding patterns merit closer examination for signals about institutional sentiment.
| Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 28.02% | 28.02% | 29.34% | 29.34% | 0.00% |
| FII | 43.54% | 44.20% | 43.49% | 42.74% | -0.66% |
| Mutual Funds | 16.75% | 16.48% | 15.94% | 15.42% | +0.27% |
| Insurance | 3.64% | 3.46% | 4.36% | 5.93% | +0.18% |
| Other DII | 1.35% | 1.41% | 1.27% | 1.16% | -0.06% |
| Non-Institutional | 6.71% | 6.43% | 5.61% | 5.41% | +0.28% |
Promoter holding has remained stable at 28.02% in the latest quarter after declining from 29.34% in the June 2025 quarter, when the promoter group likely divested a small stake. The stable promoter holding at current levels suggests no immediate plans for further stake reduction, providing comfort to investors about management's long-term commitment to the business. The promoter group, led by the Reddy family through PCR Investments Ltd. (18.93% stake), has maintained a consistent ownership structure.
Foreign institutional investor holding declined marginally by 0.66% quarter-on-quarter to 43.54% in December 2025, following an increase in the previous quarter. This modest reduction could reflect portfolio rebalancing or profit-booking at elevated valuations rather than a fundamental loss of confidence. The fact that FII holding remains above 43% indicates continued foreign investor interest in India's healthcare growth story. With 1,166 FII entities holding stakes, the ownership is well-diversified across global institutional investors.
Domestic mutual funds have been consistent buyers, with their stake increasing to 16.75% in December 2025 from 15.42% in March 2025. This steady accumulation by domestic institutional investors, representing 358 mutual fund schemes, reflects positive sentiment among Indian fund managers about the company's prospects. Insurance companies' stake has declined from 5.93% in March 2025 to 3.64% in December 2025, suggesting some profit-booking by this investor category, possibly driven by valuation concerns or portfolio rebalancing requirements.
Stock Performance: Underperformance Raises Questions
Apollo Hospitals' stock performance over the past year has been modest, with the shares gaining 6.71% compared to the Sensex's 9.01% return, resulting in negative alpha of -2.30%. This underperformance relative to the broader market, despite strong operational performance, reflects investor concerns about valuation and questions about the sustainability of premium multiples in a challenging macroeconomic environment.
| Period | Stock Return | Sensex Return | Alpha | Hospital Sector |
|---|---|---|---|---|
| 1 Week | +1.90% | +0.64% | +1.26% | — |
| 1 Month | -0.54% | +0.83% | -1.37% | — |
| 3 Months | -4.15% | +0.88% | -5.03% | — |
| 6 Months | +1.93% | +5.53% | -3.60% | — |
| YTD | +2.52% | -1.11% | +3.63% | — |
| 1 Year | +6.71% | +9.01% | -2.30% | +17.36% |
| 3 Years | +63.44% | +38.88% | +24.56% | — |
| 5 Years | +162.06% | +64.25% | +97.81% | — |
The stock's underperformance becomes more pronounced when compared to the broader hospital sector, which delivered 17.36% returns over the past year. Apollo Hospitals' 6.71% return lagged the sector by 10.65 percentage points, suggesting that investors have favoured other hospital stocks with either better growth prospects, more attractive valuations, or superior near-term momentum. This sector-relative weakness raises questions about whether Apollo Hospitals' premium valuation is justified or whether peers offer better risk-reward propositions.
Over longer time horizons, however, the stock's performance has been impressive. The three-year return of 63.44% significantly outpaced the Sensex's 38.88% gain, generating positive alpha of 24.56%. The five-year return of 162.06% compared to the Sensex's 64.25% demonstrates the wealth-creation potential of owning a quality healthcare franchise over extended periods. This divergence between short-term and long-term performance underscores the importance of investment horizon in evaluating the stock.
Technical indicators present a mixed picture. The stock currently trades in a "mildly bearish" trend that commenced on February 4, 2026, at ₹7,104.45, following a previous bearish trend. The stock trades below all key moving averages—5-day (₹7,132.89), 20-day (₹7,026.26), 50-day (₹7,091.52), 100-day (₹7,372.98), and 200-day (₹7,327.59)—suggesting technical weakness. However, the stock's low beta of 0.81 indicates it is less volatile than the broader market, providing some downside protection during market corrections.
Investment Thesis: Quality Franchise at Premium Pricing
The investment case for Apollo Hospitals rests on several pillars: market leadership in India's underpenetrated private healthcare sector, improving operational efficiency reflected in expanding margins and return ratios, strong cash flow generation capability, and the structural tailwinds from rising healthcare demand. The company's proprietary Mojo score of 68 out of 100, placing it in "HOLD" territory, reflects this balanced assessment of opportunities and risks.
The quality assessment grades the company as "Good" based on long-term financial performance, with particular strengths in sales growth (16.66% CAGR) and EBIT growth (37.14% CAGR) over five years. The financial trend remains "Positive" as of December 2025, supported by highest-ever quarterly metrics in net sales, operating profit, and net profit. The valuation grade of "Attractive" suggests that despite elevated absolute multiples, the stock offers reasonable value considering the company's quality and growth prospects.
KEY STRENGTHS
- Market leadership in Indian private hospital sector with strong brand equity and pan-India presence
- Exceptional management efficiency with ROE of 18.39% and ROCE of 17.91%, both at multi-year highs
- Robust long-term growth trajectory: 16.66% sales CAGR and 37.14% operating profit CAGR over five years
- Improving operating leverage with margins expanding to 14.93%, highest in recent quarters
- Strong debt servicing capability with EBIT to interest coverage of 8.59 times in Q3 FY26
- Healthy institutional participation at 65.27%, reflecting professional investor confidence
- Attractive EV to capital employed ratio of 7.80 times given improving ROCE trajectory
KEY CONCERNS
- Demanding valuation at 62.09 times P/E and 11.42 times P/BV leaves limited margin for error
- Stock underperformance: 6.71% return vs hospital sector's 17.36% over past year, lagging by 10.65%
- Mildly bearish technical trend with stock trading below all key moving averages
- Elevated debt levels with debt-to-EBITDA of 2.39 times, though improving
- Moderate leverage at 0.53 debt-to-equity requires continued strong cash generation
- Recent FII stake reduction of 0.66% QoQ may signal profit-booking at current valuations
- Insurance company stake decline from 5.93% to 3.64% over three quarters raises questions
Outlook: What to Watch in Coming Quarters
The trajectory of Apollo Hospitals' stock price over the next 12-18 months will likely depend on the company's ability to sustain its margin expansion trajectory whilst continuing to grow revenues at double-digit rates. Investors should monitor whether the operating margin can stabilise above 15% on a sustained basis, as this would represent a structural improvement in profitability that could justify premium valuations.
Capacity utilisation rates across the hospital network will be crucial. As the company has invested heavily in capacity expansion, achieving high occupancy rates in new facilities will determine whether these investments generate adequate returns. Any signs of pricing pressure or market share loss to competitors would be concerning, given the premium valuation multiples.
POSITIVE CATALYSTS
- Sustained margin expansion above 15% would validate premium valuation multiples
- Continued improvement in return ratios (ROE/ROCE) from current elevated levels
- Successful commissioning of new capacity with strong occupancy rates
- Deleveraging through debt reduction or EBITDA growth improving debt ratios
- Resumption of FII buying if operational performance continues to impress
RED FLAGS TO MONITOR
- Any quarter showing margin contraction or revenue growth deceleration below 10%
- Deterioration in working capital management or cash flow generation
- Continued underperformance relative to hospital sector peers
- Further institutional selling, particularly by domestic mutual funds
- Inability to maintain debt servicing comfort if interest costs rise
The broader macroeconomic environment, particularly interest rate trends and liquidity conditions, will significantly influence investor appetite for high-multiple growth stocks. In a rising rate environment, investors typically demand higher risk premiums, which could compress valuation multiples even if operational performance remains strong. Conversely, any easing of monetary conditions could support premium valuations for quality healthcare franchises.
The Verdict: Quality Franchise, But Wait for Better Entry Point
Score: 68/100
For Fresh Investors: Avoid initiating positions at current valuations. Whilst Apollo Hospitals represents a quality healthcare franchise with strong fundamentals and market leadership, the stock's demanding multiples (62x P/E, 11.42x P/BV) and recent underperformance relative to peers suggest limited upside at current levels. A 10-15% correction would offer a more attractive risk-reward proposition for long-term investors. Consider building positions gradually if the stock corrects towards ₹6,500-6,700 levels.
For Existing Holders: Maintain positions but avoid adding at current prices. The company's operational performance remains strong, with improving margins and return ratios supporting the long-term investment thesis. However, the stock's technical weakness and sector-relative underperformance warrant a cautious stance. Use any significant rally towards ₹7,500-7,800 to trim positions and book partial profits, whilst retaining core holdings for the long term.
Fair Value Estimate: ₹6,800 (5.8% downside from current levels). Based on 55x forward earnings (modest discount to current multiple given growth trajectory) and FY27 estimated EPS of ₹124, the stock appears fairly valued around ₹6,800. This assumes 15-18% earnings CAGR over the next two years, in line with historical performance. Any sustained trading above ₹7,500 would represent overvaluation, whilst levels below ₹6,500 would offer compelling long-term value.
Note— ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The views expressed are those of the author and do not constitute recommendations to buy, sell, or hold any securities.
