KPJ Healthcare Berhad has reported solid financial results for the first half of FY24, with a 61% year-on-year increase in normalised earnings. However, this performance slightly fell short of analysts' expectations, accounting for 42% of projected earnings. All analysts covering the stock have maintained a positive outlook, with RHB Stock Broking House reiterating a BUY rating and a target price of RM2.14, while Kenanga Stock Broking House has a MARKET PERFORM call with a target price of RM1.95. The company's share price currently stands at RM1.85.

The 1HFY24 revenue for KPJ increased by 14.9% year-on-year to RM1.84 billion, primarily due to a rise in patient visits and an increase in bed capacity. The group recorded a core net profit of RM171.2 million for the period, reflecting a robust recovery in patient traffic and a better mix of patient cases. Revenue from its hospitals was RM1.81 billion, an increase of 15% year-on-year, contributing to a profit after tax of RM151.6 million, which is up 13% from the previous year.

In the second quarter alone, KPJ's core earnings surged by 66% year-on-year to RM79 million, bringing the first-half figures to RM125 million. This performance is credited to improvements in operational efficiency and a steady increase in patient visits, with outpatient and inpatient numbers growing by 1% and 3% quarter-on-quarter, respectively. The hospital's bed occupancy rate improved to 66%, as the company has been cautious in expanding bed capacity to manage operational costs effectively.

While the company has shown strong fundamentals, it faces heightened competition in the healthcare sector, which may lead to challenges in pricing and market share retention. Despite this, KPJ is optimistic about future growth driven by medical tourism, government support, and advancements in technology that are expected to boost service demand. Analysts remain positive, suggesting that KPJ's strategic focus on optimising existing assets and expanding its hospital network positions it well for sustained growth.

Moreover, KPJ has declared an interim dividend of 1 sen, up from 0.65 sen in the previous year, representing a payout ratio of 56%. This is indicative of the company's commitment to returning value to shareholders even amid competitive pressures.

Looking ahead, KPJ expects to maintain its patient throughput growth of 9% for FY24, driven by an improving economic outlook and rising demand for elective surgeries. The anticipated economic growth in Malaysia, underpinned by strong domestic spending, is expected to bolster the healthcare sector's performance.

Source: Kenanga, RHB, MIDF
Title: Solid Fundamentals, but Priced In, Achieved a Historic Milestone; Keep BUY, Higher BOR Continue to Support Earnings