BH - 3Q24: In line, but concern on weak revenue

Excluding FX loss, BH’s 3Q24 core profit reached a record high of Bt2.0bn, up 2% YoY and 3% QoQ, in line with market estimate. Behind the YoY core earnings growth is strong EBITDA margin; the QoQ growth reflects seasonality. We do have a concern on weaker revenue, which fell 5% YoY (+2% QoQ). We stand by our Neutral call based on low core earnings growth of 2% CAGR in 2024-26 as the new hospital in Phuket (scheduled to open in 1H26) will pressure earnings in the immediate term.

3Q24: In line with estimates. BH reported a 3Q24 net profit of Bt2.0bn, flat YoY but up 1% QoQ; excluding FX loss, core profit reached a record high, growing 2% YoY and 3% QoQ, in line with market estimates. YoY core earnings growth was underwritten by a strong EBITDA margin, while the QoQ growth is due to seasonality. We do flag a concern on weaker revenue.

3Q24 highlights:

(-) Revenue was Bt6.4bn, down 5% YoY (but up 2% QoQ) dragged down by lower revenue from international patient services (66% of revenue), which fell 7% YoY (but rose 1% QoQ), likely due to lower revenue intensity off last year’s high base (revenue was a record high in 3Q23) and lower gain from the price increase at 4% in 2H24 vs. 6% in 1H24. Revenue from Thai patient services (34% of revenue) slid 1% YoY (but grew 2% QoQ).

(+) EBITDA margin was 3%, up from 38.6% in 3Q23 from lower cost of operations but down slightly from 40.5% in 2Q24.

Forecast maintained: 4Q24 to grow YoY but drop QoQ. 9M24 core earnings came to Bt5.9bn (+13% YoY), accounting for 76% of our full-year forecast and 75% of market consensus. We thus leave our core earnings forecast unchanged at Bt7.8bn (+12%), which suggests 4Q24 core earnings growth YoY but a slip QoQ on seasonality.

Neutral rating. BH share price fell 9% yesterday after releasing results, reflecting market concern about the weak revenue in the quarter. We will provide details after the Nov 13 analyst meeting. We keep our Neutral call based on its low core earnings growth at 2% CAGR in 2024-26 as the new hospital in Phuket (scheduled to open in 1H26) will pressure earnings in the immediate term before adding to long-term earnings. We roll valuation to end-2025, which has an insignificant change on our DCF TP, which stays at Bt300/share, based on WACC at 7.1% and LT growth at 3%.

Risks. Since international patient services contribute the majority of revenue, we are keeping an eye on the global economic slowdown and geopolitical risk that may cause clients to delay elective medical care and make it inconvenient for international patients to come to Thailand for treatment. We see ESG risk as patient safety (S): BH has adopted a variety of quality assurance systems to provide continuous patient care.