BCH - 3Q24: In line with estimates

BCH reported a 3Q24 net profit of Bt453mn, up 3% YoY and 64% QoQ, in line with INVX and market estimates. Excluding extra items, core profit was Bt456mn, flat YoY but up 35% QoQ. The flat earnings YoY reflects strong OPD and social security scheme (SC) services that were able to offset weak IPD service; the QoQ earnings improvement is due to seasonality. BCH is trading at 22x 2025PE, -2SD of historical average. We view this as presenting an attractive risk/reward opportunity, with concerns over SC high-cost care payments easing and strong earnings growth expected in 2025. We rate Outperform with end-2024 DCF TP of Bt21/share.

3Q24: In-line with estimates. BCH reported a 3Q24 net profit of Bt453mn, up 3% YoY and 64% QoQ, in line with INVX and market estimates. Excluding extra items in 3Q23, 3Q24 (COVID-19 service revenue write-off) and 2Q24 (social security scheme (SC) service revenue write-off), core profit was Bt456mn, flat YoY but up 35% QoQ. The stable YoY earnings reflect the ability of strong OPD and SC services to offset weak IPD service; the QoQ growth is due to seasonally higher revenue and EBITDA margin.

Highlights:

• Hospital revenue in 3Q24 was Bt3.3bn, up 3% YoY and 14% QoQ. By service, OPD revenue (37% of revenue) grew a strong 11% YoY and 12% QoQ, aligning with facility improvements and inclusion of additional services as well as seasonal illnesses. SC revenue (34% of revenue) grew 12% YoY and 18% QoQ on more intensive cases and additional revenue from 26 chronic diseases (Bt77mn) received in 3Q24, earlier than last year’s 4Q. IPD service (29% of revenue) continued to fall, dropping 14% YoY on fewer patients from Kuwait. These have been falling since 1Q24 as they wait for their government to list the qualifying Thai hospitals (timeline is uncertain); IPD did improve 14% QoQ
• EBITDA margin was 27% in 3Q24, down slightly from 27.4% in 3Q23 but up from a weak 21.9% in 2Q24 due to the SC service revenue write-off.

Earnings upside. 9M24 core earnings was Bt1.1bn (+11% YoY) accounting for 74% of INVX and consensus full-year forecasts. This suggests 4Q24 core earnings will drop YoY and QoQ based on its guidance of conservative revenue recognition for SC high-cost care (RW>2) at Bt7,200/RW (from a predetermined rate at Bt12,000/RW) in 4Q24. However, a recent meeting between the Social Security Office and private hospitals brightened the picture for a high-cost care payment guarantee and an official resolution is expected after a meeting on December 3. This will ease the overhang and may lead BCH to record revenue from high-cost care service in 4Q24 at a rate of Bt12,000/RW as before, giving a boost to revenue and earnings from 4Q24. Assuming this change, we see upside of 5-6% to our 2024-25 projections. We expect to be provided more details at an analyst meeting on November 28. End-2024 DCF is Bt21/share, based on WACC at 7%, long-term growth at 3%.

Risks. Change in SC reimbursement, slower patient traffic and cost burden at new facilities. We see ESG risk as patient safety (S): BCH has adopted a variety of quality assurance systems to provide continuous patient care.