Review

• IHH Healthcare Berhad’s (IHH) FY23 core net profit of RM1.3bn came in below expectations, accounting for 83.5% of ours and 77.3% of consensus’ full-year forecasts. The earnings miss was mainly attributed to higher-thanestimated finance costs. Earnings were in line at the EBITDA level at 97.3% of our estimates.

• The board declared a final dividend of 5.5sen per share, bringing the total dividend for FY23 to 18.6sen (vs. 7.0sen in FY22). The group also revised its dividend policy upwards to no less than 30% of PATMI (ex-EI) from 20% previously.

• FY23 core net profit decreased 7.3% to RM1.3bn due to higher net finance cost. Positively, revenue rose 16.4%, in tandem with EBITDA growth of 14.6% to RM20.9bn and RM4.6bn respectively driven by price adjustments to counter inflation, higher patient volumes and better case mix.

• Operationally, Malaysia operations recorded strong growth from local and foreign patients, with inpatient admissions increasing by 17% YoY. This led to a strong revenue growth of 20% to RM3.7bn. In Singapore, revenue and EBITDA increased by 13% and 10% as revenue per inpatient increased 13%, on the back of higher case intensity from complex treatments.

• In Turkiye and Europe, hospital inpatient admissions grew 6% while its revenue per inpatient increased 38% due to the price adjustments to counter inflation. As for India, revenue per inpatient surged 14% while EBITDA increased 22% due to better cost management.

• QoQ, 4Q23 revenue and EBITDA declined by 9.2% and 24.7% to RM5.3bn and RM1.1bn respectively. The weaker performance was due to the holiday and festive season.

Impact

• We revise FY24/25 earnings lower by 8.5/8.2% after imputing FY23 numbers into our model.

Outlook

• Into 2024, we expect resilient patient growth and revenue per patient, driven by expansion plans and medical inflation. In addition, IHH will maintain a tight rein on cost and mitigate inflationary as well as interest rates pressures.

Valuation

• Maintain our Hold recommendation on the stock with a TP of RM6.58/share based on SOTP valuation.

Source: TA Research - 1 Mar 2024