Review

• IHH Healthcare Berhad’s (IHH) 1Q24 core net profit of RM402.8mn (+22.1% YoY) came in within expectations, accounting for 26.7% of ours and 23.9% of consensus’ full-year forecasts.

• 1Q24 EBITDA increased 18.8% YoY to RM1.4bn in tandem with revenue growth of 15.8% to RM6.0bn (highest ever quarterly revenue), boosted by resilient patient volumes, more complex cases, price revisions to counter inflation and lower tax rate. All core markets posted double digits revenue and EBITDA growth, except for Malaysia operations.

• Malaysia operations 1Q24 revenue rose 9.1% YoY to RM954.6mn on the back of increased revenue per admission of 10% to RM10,699. However, EBITDA declined by 3.6% to RM239.3mn due to higher operating costs and initiatives to reward healthcare workers. The bed occupancy rates (BOR) declined to 67% as compared to 72% in 1Q23 despite flat inpatient admissions of 58,714.

• In Singapore, revenue and EBITDA increased by 17.7% and 19.9% respectively as revenue per inpatient increased 15% on the back of higher revenue intensity from complex treatments. As for Turkiye and Europe, hospital inpatient volumes grew 2% while its revenue per inpatient surged 51% due to the price adjustments to counter hyperinflation.

• Over to India, 1Q24 EBITDA surged 50.4%, ahead of higher revenue of 20.4%. Coupled with better cost management, improving performance of Gleneagles India and growth of Fortis, EBITDA margin increased by 3.8 pts to 18.9%.

Impact

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

Outlook

• Driven by the strong underlying demand, IHH targets to add 33% or close to 4,000 of organic new beds over the next five years. Note that the group will maintain a tight rein on cost and leverage operational synergies to mitigate inflationary and staff costs pressures.

Valuation

• Maintain our Hold recommendation on the stock with a TP of RM6.65/share based on SOTP valuation.

Source: TA Research - 30 May 2024