KPJ Healthcare’s 2QFY23 net profit jumped 74% YoY to RM46.9m, mainly attributed to the higher bed occupancy rate (BOR) and higher influx of inpatient volume. For 1HFY23, KPJ net profit increased by 101% YoY to RM98.8m. The results were within our expectations at 49% but below street’s estimates at 43% of full year forecasts respectively. We make no changes to our earnings forecast, maintaining our Outperform rating on KPJ with an unchanged SOTP-based TP of RM1.35, based on 10x FY24 EV/EBITDA. On a side note, KPJ declared an interim diviend of 0.80sen per share.

• 2QFY23 revenue rose 14.3% YoY. KPJ reported a revenue of RM799.5m in 2QFY23, delivering a 14.3% YoY growth mainly driven by the growth in Malaysia’s segment which recorded a higher revenue of RM770.7m (+13.6% YoY). The better performance in Malaysia segment was supported by an increase of the total number of inpatient visits by 13% YoY, coupled with 17% YoY improvement in inpatient days from 166,520 to 194,641 days in 2QFY23. Meanwhile, the overall Group BOR has increased to 63% in 2QFY23 (2QFY22:56%).

• Stronger PATAMI growth. In tandem with the growth in revenue, KPJ’s 2QFY23 PBT jumped 48% YoY to RM68.5m. This leads to a 2ppts PBT margin expansions to 8.6% in 2QFY23. Meanwhile, IHH’s net profit stood at RM46.9m in 2QFY23 (+73.4% YoY).

• Outlook. Moving into 2HFY23, we believe KPJ will continue to benefit from the reopening of international borders which results in the resurgence of healthcare services with higher influx of inpatients. KPJ’s continuous effort in expanding its existing capacities to 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 - 30 Aug 2023