Mitra Keluarga: Financial Outlook and Comprehensive Analysis

Broker Name: PT Maybank Sekuritas Indonesia

Date of Report: November 4, 2024

Overview of Mitra Keluarga

Mitra Keluarga (MIKA IJ) is recognized as the most profitable listed hospital company in Indonesia, renowned for its consistent top operating performance and strong corporate governance. With a commitment to sustainable dividend payouts, Mitra Keluarga remains a solid investment despite some challenges in 2024.

Investment Recommendation

PT Maybank Sekuritas Indonesia maintains a BUY recommendation on Mitra Keluarga, albeit with a slightly lower target price (TP) of IDR3,400, which implies a 23.6x FY25 EV/EBITDA (+0.5SD from its 3-year mean). This premium valuation is justified by the company’s leading profitability and robust governance practices.

Financial Performance Analysis

Top Line and Profit Missed Expectations

The 9M24 revenue of IDR3.6 trillion (+15% YoY) achieved 73% of both the company’s and consensus full-year forecast. However, the 3Q24 top line was IDR1.2 trillion (+5% YoY, -4% QoQ), indicating weakened traffic due to normalization post-dengue peak and insurance issues at some major hospitals. Mitra Keluarga expects services to resume in 4Q24 after negotiations with the insurance companies.

Outpatient Traffic Remains Strong

Despite a decline in inpatient admissions in 3Q24 (-7% QoQ, +6% YoY), outpatient volume showed robust growth (+4% QoQ, +12% YoY). This indicates strong organic demand, supported by a 5% capacity expansion this year. Margins contracted due to operating deleveraging, but the company maintained a 9M24 EBITDA margin of 37.3%, aligning with its FY24 target of 37-38.5%.

Expansion and Future Growth Drivers

MIKA plans to open 2 new hospitals in 2025 in Sidoarjo and Cirebon, along with brownfield projects. The expansion of oncology and stroke centers is expected to drive higher intensity cases. Despite a slight revision down in FY24 profit forecasts, the company anticipates achieving a mid-teens earnings CAGR due to continuous capacity expansion and increased treatment intensity.

Market Performance

The share price of Mitra Keluarga is currently IDR2,800, with a 12-month price target of IDR3,400 (+22%). The statistics reveal a 52-week high/low of IDR3,270/2,530, an average turnover of USD36.5 million, and a market capitalization of IDR39.4 trillion (USD2.5 billion). The major shareholders include PT Griyainsani Cakrasadaya (62.2%), Ir. Rustiyan Oen, MBA (1.3%), and Jozef Darmawan Angkasa, MBA, MSc (0.0%).

Company Description

Mitra Keluarga operates 30 hospitals across Indonesia, focusing on specialization and high-income urban areas. This strategic positioning allows the company to capture the growing healthcare demand in major cities like Jakarta, Greater Jakarta, and Surabaya.

Financial Metrics

MIKA has demonstrated the ability to rapidly ramp up new hospitals, achieving positive EBITDA in less than 6 months on average. This contributes to its high profitability, with a forecasted EBITDA margin of 37% and ROE of 18% in FY24. The company expects a 12% revenue/EBITDA CAGR for FY24-26, driven by higher capacity, demand, and improved gross profit margins.

Gross Margin and EBITDA Margin

Mitra Keluarga’s gross margin is expected to remain stable at around 52%, while the EBITDA margin is projected to be around 37% for FY24-26. The net margin is also expected to improve, reflecting the company’s focus on operational efficiency and cost management.

Growth and Expansion

MIKA’s strategic expansion plans include adding new hospitals and enhancing existing facilities to cater to high-intensity cases. The company is also focusing on expanding its centers of excellence, particularly in oncology and stroke treatment, to drive future growth.

Capital Expenditure and Free Cash Flow

The company plans significant capital expenditure to support its expansion plans. However, it also expects strong free cash flow generation, providing a solid financial foundation for sustained growth.

Conclusion

Mitra Keluarga remains a strong investment opportunity with a proven track record of profitability, strategic growth plans, and robust financial metrics. Despite some challenges in 2024, the company’s focus on expansion and operational efficiency positions it well for future growth.

Disclaimer

This analysis is based on the report prepared by PT Maybank Sekuritas Indonesia dated November 4, 2024, and is intended for informational purposes only. Investors should seek financial advice tailored to their specific needs before making investment decisions.