RJH reported 2Q24 net profit of Bt119mn, up 27% YoY and 3% QoQ, beating market estimate by 12% and breaking the seasonal low pattern on strong revenue, largely from SC services. However, we expect its 2H24 and 2025 earnings to face a short-term hiccup from the initial cost burden from the new facility. We rate it Neutral with an end-2024 TP of Bt28/share. 2Q24: Beat estimates on strong revenue. RJH reported 2Q24 net profit of Bt119mn, up 27% YoY and 3% QoQ, with strong revenue leading it to beat market estimate by 12%. RJH booked an after-tax expense of Bt15mn, adjusting to reflects the lower actual payment for high-cost care (RW>2) under social security (SC) services. For services provided in November-December 2023, the payment rate was Bt7,200/RW, below the predetermined rate of Bt12,000/RW due to a budget shortfall. Excluding this, core earnings were strong at Bt133mn, up 42% YoY and 15% QoQ, breaking the seasonal low pattern, backed by strong revenue from SC services.
Dividend of Bt0.30/share for 1H24 operations, 1.3% dividend yield. XD is August 22 and payment is September 6. Highlights: · Revenue was Bt695mn, up 28% YoY and 10% QoQ. By service, revenue from SC (51% of revenue) grew 36% YoY and 19% QoQ, driven by rising average revenue per insured person (+37% YoY and +19% QoQ) reflecting more intensive cases, with the number of SC insured persons stable at 212.8K. Revenue from IPD service (25% of revenue) grew 29% YoY and 9% QoQ and revenue from OPD service (24% of revenue) grew 7% YoY but dropped 5% QoQ. · EBITDA margin was 27.8% in 2Q24, down from 28.4% in 2Q23 and 29.9% in 1Q24 due to the extra expense from the lower actual payment for high-cost care (RW>2) and rising staff cost related to new facilities, Rangsi Raksa Rajthanee Hospital in Ayutthaya (opened in Jan 2024) and Ratchathani Nongkhae Hospital in Saraburi (to open in Oct 2024).
Earnings forecast maintained. We revised up our 2024 core earnings by 10% and 2025F by 4% to factor in the beat. In 3Q24, we expect core earnings to be flat YoY but drop QoQ due to the initial cost burden from the new facility, Rajthanee Nongkhae Hospital in Saraburi. The first full year of the new investment will cause a short-term hiccup: we forecast a drop of 3% YoY in core earnings in 2025. We maintain our Neutral rating on RJH with an end-2024 TP of Bt28/share, based on WACC at 6% and long-term growth at 1.5%; the revision has an insignificant effect on our TP.
Risks. Change in SC reimbursement, slower patient traffic and cost burden at new facilities. We see ESG risk as patient safety (S): RJH has adopted a variety of quality assurance systems to provide continuous patient care.
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