RJH – 3Q24: Beat on revenue and tax income

3Q24: Beat estimates on strong revenue plus tax income. RJH reported 3Q24 net profit of Bt214mn, up 77% YoY and 80% QoQ, with strong revenue and tax income leading it to beat market estimates by 39%.

Highlights:

• Revenue was Bt794mn, up 28% YoY and 14% QoQ. By service, revenue from the social security scheme (SC, 52% of revenue) grew 52% YoY and 16% QoQ, driven by rising average revenue per insured person (up 51% YoY and 16% QoQ) reflecting more intensive cases and additional revenue from 26 chronic diseases. Revenue from IPD service (25% of revenue) grew 12% YoY and 12% QoQ and revenue from OPD service (23% of revenue) increased 10% YoY and 14% QoQ.
• EBITDA margin was 32.6% in 3Q24, up from 30.7% in 3Q23 and 27.8% in 2Q24 due to the strong revenue.
• RJH reported tax income of Bt1mn vs. tax expense of Bt30mn in 3Q23 and 2Q24 as it received tax benefit from donating medical equipment to public hospitals in the quarter.

Earnings raised, but expect earnings to slow down in 2025. We revised up our 2024 core earnings by 19% and 2025F by 10% to factor in the beat in 3Q24. RJH opened a new hospital, Rajthanee Nongkhae Hospital, in Saraburi on October 1 and we believe the initial cost burden will cause a short-term earnings hiccup and thus expect 4Q24 core earnings to be flat YoY but drop QoQ, with 2025 core earnings slipping 6% YoY in the first full year of the new investment. With this, we maintain our Neutral rating on RJH with an end-2025 TP of Bt29/share (up from end-2024 TP of Bt28/share), based on WACC at 6% and long-term growth at 2%.

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.