Comprehensive Financial Analysis of Mitra Keluarga (MIKA IJ)

Prepared by PT Maybank Sekuritas Indonesia

November 4, 2024

Overview

Mitra Keluarga Karyasehat Tbk, a leading healthcare provider in Indonesia, has maintained its position as the most profitable listed hospital company in the country. This report, prepared by PT Maybank Sekuritas Indonesia, provides a comprehensive analysis of Mitra Keluarga (MIKA IJ), covering its financial performance, growth prospects, and strategic initiatives.

Investment Thesis

We maintain a BUY rating on Mitra Keluarga (MIKA IJ) with a slightly lower target price (TP) of IDR 3,400, implying a 23.6x FY25 EV/EBITDA (+0.5SD from its 3-year mean). MIKA’s premium valuation is warranted due to its consistent top-tier profitability and strong corporate governance, ensuring sustainable dividend payouts (c.50% for the foreseeable future). However, risks include slower patient growth and unfavorable JKN policies.

Financial Performance

Revenue and Profitability

For the first nine months of 2024 (9M24), Mitra Keluarga recorded a revenue of IDR 3.6 trillion, reflecting a 15% year-over-year (YoY) increase. However, this only achieved 73% of both our and the consensus full-year forecast. The third quarter of 2024 (3Q24) saw a top-line revenue of IDR 1.2 trillion, marking a 5% YoY increase but a 4% quarter-over-quarter (QoQ) decline. This decline was attributed to the normalization post-dengue peak in 2Q24 and insurance issues at some of MIKA’s major hospitals, which halted cashless services. These services are expected to resume in 4Q24 following negotiations with insurance companies.

Outpatient Traffic and Capacity Expansion

Despite a 7% QoQ decline in inpatient admissions in 3Q24, outpatient volume remained robust with a 4% QoQ and 12% YoY increase. This indicates strong organic demand growth, bolstered by a 5% capacity expansion this year. MIKA’s EBITDA margin for 9M24 was 37.3%, aligning with the company’s FY24 target of 37-38.5%, reaffirming its status as the most profitable hospital in Indonesia.

Expansion and Future Growth

MIKA plans to continue its capacity expansion with both greenfield and brownfield projects. Two new hospitals are scheduled to open in 2025 in Sidoarjo and Cirebon. Additionally, the company is focusing on increasing the intensity of cases, particularly in its expanded oncology and stroke centers.

Financial Metrics and Forecast

We forecast a 12% CAGR in both revenue and EBITDA for MIKA for FY24-26E, driven by higher capacity and demand, improved gross profit margins due to higher treatment intensity, and increased average selling prices (ASP) for both outpatient and inpatient treatments.

Key Financial Ratios

• Revenue for FY24E: IDR 4,902 billion
• EBITDA for FY24E: IDR 1,818 billion
• Net Profit for FY24E: IDR 1,179 billion
• Core P/E (FY24E): 33.4x
• Net Dividend Yield (FY24E): 1.2%
• ROAA (FY24E): 15.1%
• EV/EBITDA (FY24E): 21.0x

Risks and Swing Factors

Upside Risks

• Stronger-than-expected volume due to mass occurrences of certain illnesses, such as dengue and respiratory illnesses.
• Successful execution of its center of excellence and treatment intensity expansion.
• More favorable policies and terms of payment from the government’s JKN program.

Downside Risks

• Economic slowdown or reduced consumer spending power, leading to a preference for downtrading.
• Significant rise in input costs, which cannot be passed on to customers.
• Unfavorable regulatory changes.

Conclusion

Mitra Keluarga continues to demonstrate strong financial performance and strategic growth initiatives, positioning itself as a leader in Indonesia’s healthcare sector. With robust outpatient traffic, continuous capacity expansion, and a focus on high-intensity treatments, MIKA is well-positioned for sustainable growth despite potential risks. Investors should consider the company’s strong profitability and strategic initiatives while being mindful of the associated risks.