Review

• IHH Healthcare Berhad’s (IHH) 9M23 core net profit of RM1.0bn (- 2.5% YoY) accounted for 66.2% and 60.0% of ours and consensus’ full-year estimates. We deem the results as within expectations as we expect 4Q23 to be stronger on the back of higher occupancy rates.

• 9M23 revenue increased 19.1%, in tandem with EBITDA growth of 20.0% to RM15.6bn and RM3.6bn respectively due to higher patient volumes and improved case mix. Note that the group saw a strong recovery from nonCovid revenues as both foreign and local patients returned to seek treatment.

• Operationally, Malaysia operations recorded a strong EBITDA growth of 18% YoY in 9M23 as revenue per inpatient grew 3% while inpatient admissions surged 21%. In Singapore, revenue and EBITDA increased by 14% and 10% as revenue per inpatient increased 15%. The solid performance was driven by price adjustment and more acute patients seeking treatment.

• In Turkiye and Europe, hospital inpatient admissions increased 8% while its revenue per inpatient increased 42% due to the price adjustments to counter inflation. As for India, revenue per inpatient surged 11% while inpatient admission increased 5% on the back of growth in domestic electives.

• QoQ, 3Q23 revenue and EBITDA rose by 24.6% and 41.4% to RM5.8bn and RM1.4bn respectively. The commendable performance was driven by: i) higher occupancy rates of 70% (vs. 67% in 2Q23), ii) cost management and iii) credit adjustments relating to the application of MFRS 129.

Impact

• No change to our earnings projections, pending results briefing today.

Outlook

• We expect IHH’s growth momentum to continue into 4Q23 driven by patient volume growth and prudent cost controls. Overall, the group target to raise its bed capacity by 33% over the next 5 years.

Valuation

• Reiterate our Hold recommendation on the stock with an unchanged TP of RM6.30/share based on SOTP valuation.

Source: TA Research - 1 Dec 2023