KPJ Healthcare’s 1QFY23 net profit jumped 134.4% YoY to RM51.9m, mainly due to higher bed occupancy rate (BOR) and better performance in patients visit. A rise in inpatient days and a higher share of profit from associates also attributed to the increase in net profit. The result came in within our and consensus estimates at 26% and 24% of full year forecasts respectively. We maintain our Outperform call on KPJ, with earnings forecasts remained unchanged. Our SOTP-based TP is subsequently revised to RM1.35 (previously RM1.25) as we roll over our valuation to FY24F based on 10x EV/EBITDA. KPJ declared an interim dividend of 0.65sen per share.

• 1QFY23 revenue rose 29.2% YoY. KPJ reported a revenue of RM829m in 1QFY23, delivering a 29.2% YoY growth mainly driven by growth in Malaysia’s segment which recorded a higher revenue of RM800.7m (+30% YoY). The better performance in Malaysia segment was supported by a higher BOR of 70% (1QFY22: 48%) and a higher number of inpatient visit. The total number of inpatient days in Malaysia segment has also shown a 49% improvement from 141,371 to 210,448 days. Meanwhile, the group’s total number of inpatient visit has increased 35% YoY, while the total number of outpatient visit have dropped slightly YoY by 1.9%.

• Stronger PATAMI growth. In tandem with the growth in revenue, KPJ’s 1QFY23 PBT jumped 102.2% YoY to RM77.6m as margin expanded by 3.4 ppts to 9.4%. Meanwhile, 1QFY23 net profit stood at RM51.9m (+134.4% YoY). Also, the stronger performance in the current quarter also supported by a higher share of profit from associates at RM10.3m from RM7.7m in 1QFY22 (+34% YoY).

• Outlook. Looking ahead, we expect KPJ to further benefit from the on going economic recovery and the reopening of international borders, which should result in a higher influx of inpatients. Furthermore, KPJ's strategic focus on medical health tourism has allowed the group to command premium pricing, leading to improved revenue intensity and economies of scale that help mitigate the impact of inflationary pressures. We believe KPJ is well-positioned to capitalize on favorable demographic trends, such as an aging population and growing middle-income segment, driving long-term growth by increasing demand for specialized healthcare services and expanding the customer base with greater affordability.

Source: PublicInvest Research - 31 May 2023