KPJ Healthcare’s (KPJ) 1QFY24 net profit increased by 39% YoY to RM75.8m, mainly due to higher inpatient volume. After stripping off nonoperating items, KPJ 1QFY24 core net profit increased by 11% YoY to RM60.3m, compared to a core net profit of RM54.6m in 1QFY23. The results were broadly in-line with both our and streets estimates at 22% and 20% of full-year forecast respectively. Going forward, we expect KPJ’s BOR to remain at c.70% backed by higher influx of patient volume and number of deliveries. We maintain our FY24-26F earnings forecasts (minor adjustment due to bookkeeping changes) and our Outperform rating with a higher SOTP-based TP of RM2.21 as we roll over our valuation to FY25 based on 12x EV/EBITDA (near Malaysia hospital average). KPJ declared an interim dividend of 1.0 sen per share (bringing the total DPS to 2.0sen for FY24).

• Revenue. KPJ reported a revenue of RM908.0m in 1QFY24 (+11% YoY) mainly driven by the growth in Malaysia’s segment which recorded a higher revenue of RM892.6m (+12% YoY). The better performance in Malaysia segment was supported by a 3% YoY increase in inpatient volume. However, the BOR has dropped to 65% in 1QFY24 (1QFY23: 70%), due to an increase of total operational bed of 8% YoY to 3,693 beds in 1QFY24 from 3,416 beds in 1QFY23. On a QoQ basis, KPJ’s revenue dropped slightlyby 0.38% QoQ, mainly due to a decline in both inpatient and outpatient visits by 4% QoQ and 6% QoQ respectively.

• Net Profit. In tandem with a higher revenue, KPJ’s 1QFY24 net profit increased by 39% YoY to RM75.8m in 1QFY24, compared to a net profit of RM54.6m in 1QFY23. KPJ’s PBT margin improved by 4.9ppts to 14.8% in 1QFY24. After stripping off the non-operating items, KPJ’s core net profit increased 10.5% YoY to RM60.3m in 1QFY24, compared to a core net profit of RM54.6m in 1QFY23.

• Outlook. Going forward, we remain optimistic on KPJ’s outlook. With theGroup’s on-going marketing effort in healthcare tourism, we believe KPJis able to secure more tourist patients especially from Indonesia. Wecontinue to like KPJ’s efforts in identifying and optimizingunderperforming assets, coupled with improvements in routine businessoperations and processes. With favorable demographic trends, includingan aging population and a growing middle-income segment, KPJ ispoised for sustained growth, driven by heightened demand for specializedhealthcare services and improved accessibility.

Source: PublicInvest Research - 28 May 2024