The healthcare sector showed a slight sequential improvement in earnings delivery for 2QCY24, with private hospitals notably outperforming their peers. Notable players such as IHH and KPJ demonstrated robust performance, driven by increased demand and better operational yields. Despite the generally positive performance among private hospitals, results from pharmaceutical and health supplement companies were more mixed. Notably, PHARMA and KOTRA met expectations, while NOVA fell short due to a temporary dip in consumer spending.
In particular, IHH’s results for 1HFY24 met forecasts with a 30% year-on-year increase in core net profit, reflecting improved revenue intensity and better yields. The company anticipates further earnings acceleration in the latter half of the year, supported by higher yield services and an increase in medical tourists, particularly from Acibadem and post-election effects in India. Meanwhile, KPJ also met expectations, with a solid performance despite a slower festive period. KPJ’s growth was driven by increased patient throughput, improved bed capacity, and higher revenue per patient.
Looking ahead, global healthcare expenditures are projected to reach USD10 trillion by 2026, up from USD8.4 trillion in 2022. This growth is driven by rising chronic diseases and a significant portion of spending being directed towards cardiovascular diseases, cancer, and respiratory diseases. For 2024, IHH is expected to see revenue per inpatient growth of 12% to 16%, with inpatient throughput growth estimated at 9% to 12%. The company’s ability to raise prices in response to inflation highlights its strong pricing power, bolstered by its presence in multiple international markets.
KPJ is also poised for growth, with an anticipated 9% increase in patient throughput and a bed occupancy rate of 72% for 2024. This optimism is based on a recovery in elective surgeries and a large network of private hospitals. However, the recent rise in its share price may have already priced in these positive fundamentals.
In the realm of health supplements and OTC drugs, KOTRA’s results met expectations, while NOVA’s performance was below forecast due to weaker consumer sentiment and lower margins. The OTC pharmaceuticals market in Malaysia is expected to grow at a compound annual growth rate (CAGR) of 6% to USD715 million (RM3.2 billion) by 2027, which bodes well for KOTRA’s diverse product offerings and integrated business model.
NOVA is ramping up production at a new facility and expanding its product range, including new health supplements and functional foods. Conversely, PHARMA, still under PN17 status, faced challenges with weaker results in 2QFY24 but expects recovery in the latter half of the year as more products are procured and its product list expands.
The healthcare sector remains attractive, particularly for private hospital operators like IHH and KPJ, which are well-positioned to benefit from ongoing demand and industry growth.
Source: Kenanga
Title: Private Hospitals Lead The Way
