Bumrungrad Hospital Q3 Earnings Disappoint Despite High Season: Capacity Expansion to Drive Long-Term Growth

Bumrungrad Hospital: A Comprehensive Analysis of 3Q24 Performance and Future Projections

Broker Name: UOB Kay Hian Private Limited

Date of Report: Friday, 08 November 2024

Introduction

Bumrungrad Hospital (BH), a premier healthcare provider in Thailand, has recently released its 3Q24 financial results. Despite high expectations during the peak season, the earnings report fell short of market expectations. This article delves deep into the company’s performance, highlighting key financial metrics, the impact of external factors, and long-term growth prospects.

Company Overview

Bumrungrad Hospital offers a wide range of healthcare services, including behavioral health, diabetes management, digestive disease treatment, hyperbaric oxygen therapy, joint replacement, rehabilitation, travel medicine, and refractive surgery. The hospital caters to both local and international patients.

Stock Performance

The stock is currently rated as a “BUY” with a share price of Bt262.00 and a target price of Bt303.00, indicating an upside potential of 15.6%. The hospital’s market cap stands at Btm 208,287.4 (US\$m 6,064.2). Despite a disappointing 3Q24, the stock has shown resilience with a year-to-date performance of 18.0%.

3Q24 Financial Results

BH reported a net profit of Bt1.96b in 3Q24, which remained flat year-over-year (yoy) and increased slightly by 1.2% quarter-over-quarter (qoq). The net profit fell short of market expectations, primarily due to a decrease in revenue from both Thai and foreign patients. The total revenue for the quarter was Bt6.4b, down by 5.0% yoy but up by 1.6% qoq.

Revenue Breakdown

The company faced a decline in revenue from both Thai and foreign patients, which dropped by 1.4% and 6.8% yoy, respectively. This decline was surprising given the high season expectations. Despite the revenue drop, BH managed to control costs effectively, resulting in a gross margin expansion of 1.8 percentage points (ppt) yoy.

Key Financial Metrics

Total Revenue: Bt6.4b (-5% yoy, +2% qoq)
Gross Profit: Bt3.3b (-2% yoy, +1% qoq)
SG&A: Bt1.0b (-4% yoy, 0% qoq)
EBITDA: Bt2.6b (0% yoy, +2% qoq)
Pre-tax Profit: Bt2.4b (+1% yoy, +1% qoq)
Net Profit: Bt1.96b (0% yoy, +1% qoq)
EPS: Bt2.46 (0% yoy, +1% qoq)

Key Factors Influencing Performance

Impact of Kuwait Patients

Kuwait has historically been a significant contributor to BH’s foreign patient revenue. However, the absence of Kuwait patients due to government reforms led to a 66% yoy drop in Kuwait patient revenue in 1H24. This shortfall was a major factor in the overall revenue decline.

Surprise Drop in Patient Revenue

The unexpected decline in revenue from both Thai and foreign patients in 3Q24 was surprising. The rainy season, which is typically a high period for Thai patient growth, didn’t yield the expected results. Additionally, despite a 25% yoy growth in arrivals from Middle Eastern tourists in 9M24, foreign patient revenue dropped.

Long-Term Growth Prospects

BH is focusing on capacity expansion through its Soi One project, which includes the construction of additional facilities adjacent to the main campus. This includes increasing the number of licensed beds, a dedicated women’s and children’s clinic, and a specialized cancer treatment clinic. The new hospital in Phuket, BIH Phuket, is also under construction and is expected to be completed by 2Q26.

Expansion Projects

Soi One Project: Additional facilities and increased bed capacity at the main campus.
BIH Phuket: A new 212-bed hospital for primary and secondary treatments, expected completion by 2Q26.
VitalLife: A wellness and lifestyle medicine brand launched in Phuket to attract expats with personalized life packages and preventive care products and services.

Valuation and Recommendation

Despite the disappointing 3Q24 earnings, BH is maintained as a “BUY” with a target price of Bt303.00. The valuation is based on a 2025 EV/EBITDA multiple of 20.0x, which is 1SD below the mean of the 2015-19 multiple. The long-term growth prospects from capacity expansion projects and BH’s reputation for medical excellence support this recommendation.

Environmental, Social, and Governance (ESG) Initiatives

Environmental

Energy Efficiency: Investment in eco-friendly infrastructure to reduce carbon footprint and energy consumption.
Waste Management: Emphasis on safe disposal of medical waste and minimizing the environmental impact of hazardous materials.

Social

Healthcare Access: Providing high-quality healthcare services to both local and international patients and engaging in charitable work for underprivileged communities.

Governance

Corporate Governance: Adhering to high standards with transparent reporting, strict regulatory compliance, and clear anti-corruption policies.

Quarterly Performance and Revenue Contribution

The quarterly performance metrics show a stable EBITDA margin of 41.0%, with a slight decline in gross margin and net profit margin. The revenue contribution from domestic and international patients has remained relatively stable, with domestic patients contributing approximately 34% and international patients contributing around 66%.

Conclusion

In conclusion, Bumrungrad Hospital’s 3Q24 performance was below expectations primarily due to a decline in patient revenue. However, the company has strong long-term growth prospects driven by ongoing capacity expansion projects and its reputation for medical excellence. With a robust ESG framework and strategic initiatives in place, BH is well-positioned for future growth.