Chularat Hospital Likely to benefit from more referral cases
■ We believe that CHG will benefit not only from performing Covid-19 tests but also from more heart disease patients referred from public hospitals.
■ We raise our core profit forecasts by 6-7% yoy for FY21-23F on the back of more referral cases and revenues from Covid-19 tests.
■ We reiterate our Add call on CHG with a higher THB3.42 target price (35.5x FY22F P/E, -0.25 s.d.). CHG remains our top pick in the sector. More heart surgery cases from public hospitals With the overwhelming number of new Covid-19 cases, we believe that public hospitals will have to refer their non-Covid-19 cases to other hospitals; CHG is likely to benefit from more referred heart surgery cases as it provides services to National Health Security Office (NHSO) patients.
We have seen rising contributions from NHSO for CHG over the past few years. Other hospitals we cover do not take NHSO patients. We believe this trend is likely to continue in FY21-22F on the back of new waves of Covid-19 in Thailand.
Note that Chularat Hospital’s revenue rose 5% yoy in FY20 and we expect it to grow 14% yoy in FY21F and 6% yoy in FY22F. CHG is also active in conducting Covid-19 tests CHG also performs more than 1,500 polymerase chain reaction (PCR) tests per day. We estimate that CHG will conduct about 65k tests in 2Q21F vs. 30k in 1Q21F. With THB2,300/test, we expect CHG to generate around THB150m revenues from these tests, which we believe will form about 10% of its 2Q21F revenues.
With 25% EBITDA margin, we expect these Covid-19 tests to generate THB30m net profit for CHG in 2Q21F or about 14% of its 2Q21F core net profit or 3% of FY21F core net profit. Raise core profit forecasts by 6-7% yoy for FY21-23F To reflect more revenues from referral cases and Covid-19 tests, we have revised up our core net profit forecasts by 6-7% for FY21-23F. These revenues are likely to help boost its gross margins.
As such, we expect CHG’s core net profit to rise 15% yoy in FY21F, and 4% yoy in FY22F. Meanwhile, we expect CHG to make THB213m core net profit in 1Q21F, up 15% yoy but down 16% qoq. Reiterate Add with a higher THB3.42 target price Following our earnings upgrade, our target price for CHG rises to THB3.42, still based on 35.5x FY22F P/E, which is 0.25 s.d. below its 5-year mean, from THB3.16 (35.5x, -0.5 s.d.) previously.
With new waves of Covid-19 breaking out globally, we believe that CHG will be affected the least among the five hospitals we cover as foreign patient revenues formed only 3% of its FY19 revenues. We believe that strong quarterly earnings growth will catalyse its share price while a new wave of Covid-19 in the provinces where its hospitals are located is a downside risk to our call. We reiterate our Add call and CHG remains our top pick in the sector.
Likely to benefit from more referral cases More heart surgery cases from public hospitals We believe that CHG is likely to benefit indirectly from the third wave of Covid-19 outbreak in Thailand as public hospitals have to mobilise their resources for Covid-19 treatment. As such, they do not have much capacity to handle nonCovid-19 cases and would have to refer their patients to other hospitals, including private ones.
However, not many private hospitals would benefit from these referral cases from public hospitals as they normally do not participate in the National Health Security Office (NHSO) programme. CHG accepts heart surgery cases referred from public hospitals.
We have seen rising contributions from NHSO for CHG over the past few years. Specifically, revenues from NHSO patients rose 17% yoy in FY20, while revenues from cash outpatients rose 2% yoy and inpatients fell 4% yoy in FY20. We believe this trend is likely to continue in FY21-22F on the back of new waves of Covid-19 outbreak in Thailand. Note that CHG’s revenues rose 5% yoy in FY20 and we expect it to grow 14% yoy in FY21F and 6% yoy in FY22F.
– By CIMB Bank Research
