IHH Healthcare Berhad
(5225 | IHH MK) Healthcare | Healthcare Providers
Subsidiaries’ Collaboration Deepens IHH’s Footprint in India
DEVELOPMENT
- IHH Healthcare (IHH) had announced a strategic collaboration between its India subsidiaries, Fortis Healthcare (Fortis) and Gleneagles Healthcare India (GHI) for stronger business performance and sustainable growth.
- Under an operation and maintenance services agreement, Fortis will manage the operations of 5 out of 6 hospitals under the GHI network.
OUR VIEW
- Win-win partnership. By integrating the operations of GHI hospitals, Fortis – which boasted an extensive network of 27 hospitals – can negotiate better prices for medical supplies, pharmaceuticals, and equipment. This partnership allows Fortis to implement its established operational protocols, quality control measures, and administrative systems, ultimately leading to improved efficiency, reduced errors, and a more consistent patient experience. Meanwhile, GHI is renowned for multi-organ transplant and tertiary care services, allowing both networks to leverage on each other’s specialised expertise.
- Keeping a strong presence in India. The collaboration strengthens IHH’s pan-India presence, creating a comprehensive network of hospitals and clinics across multiple states, and allowing IHH to better serve the evolving healthcare needs of a larger population. By unlocking operational synergies, the collaboration is expected to improve the profitability of GHI, which in turn will benefit IHH’s overall financial performance in India.
- Risks can be offset by integration plans. We anticipate that the downside risks for this collaboration include: (i) differences in corporate cultures and management styles between Fortis and GHI, (ii) perceived loss of autonomy for GHI hospitals, (iii) regulatory and legal issues, and (iv) inadequate incentives. Nevertheless, we believe that IHH has the capacity and capability to mitigate these challenges, through a clear integration plan, proper staff training and preserved autonomy in both networks’ financial management.
- All in all, we are positive on this collaboration. With the consolidation of IHH’s Indian operations – contributed by the size and operational expertise of Fortis, and the specialized brand value and talent of GHI – IHH is expected to remain sanguine in its operations. We anticipate the result to this partnership is a more resilient, efficient, and comprehensive healthcare platform that is well-positioned for long-term growth in India.
- We make no changes to our earnings estimates for IHH at this juncture and maintain our BUY call for IHH with a target price of RM8.18.
INVESTMENT STATISTICS
Annual Standardized Year end 31 March
| 2023A | 2024A | 2025E | 2026F | 2027F | |
|---|---|---|---|---|---|
| Revenue | 21,255.0 | 24,267.0 | 24,865.7 | 25,702.5 | 26,435.8 |
| EBITDA | 3,498.0 | 5,470.0 | 5,661.0 | 5,678.5 | 5,750.7 |
| PBT | 4,049.6 | 3,756.0 | 3,682.2 | 3,703.8 | 3,731.0 |
| PATANCI | 2,951.5 | 2,656.4 | 2,557.1 | 2,689.1 | 3,443.9 |
| Normalised PATANCI | 1,278.8 | 1,684.4 | 1,594.9 | 1,681.9 | 1,723.7 |
| Basic EPS (sen) | 14.5 | 19.1 | 18.1 | 19.1 | 19.6 |
| EPS growth (%) | (14.6) | 31.7 | (5.3) | 5.5 | 2.5 |
| PBT margin (%) | 19.1 | 15.5 | 14.8 | 14.4 | 14.1 |
| PATANCI margin (%) | 13.9 | 10.9 | 10.3 | 10.5 | 13.0 |
| PER (x) | 56.3 | 42.8 | 45.2 | 42.8 | 41.8 |
| Dividend per share (sen) | 18.6 | 10.0 | 10.5 | 10.9 | 11.2 |
| Dividend yield (%) | 2.3 | 1.2 | 1.3 | 1.3 | 1.4 |
Source: Company, MBSBR
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MBSB INVESTMENT BANK (formerly known as MIDF Amanah Investment Bank) : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
- BUY
- Total return is expected to be >10% over the next 12 months.
- TRADING BUY
- The stock price is expected to rise by >10% within 3 months after a Trading Buy rating has been assigned due to positive news flow.
- NEUTRAL
- Total return is expected to be between -10% and +10% over the next 12 months.
- SELL
- Total return is expected to be <-10% over the next 12 months.
- TRADING SELL
- The stock price is expected to fall by >10% within 3 months after a Trading Sell rating has been assigned due to negative news flow.
SECTOR RECOMMENDATIONS
- POSITIVE
- The sector is expected to outperform the overall market over the next 12 months.
- NEUTRAL
- The sector is to perform in line with the overall market over the next 12 months.
- NEGATIVE
- The sector is expected to underperform the overall market over the next 12 months.
ESG RECOMMENDATIONS* – source Bursa Malaysia and FTSE Russell
- Top 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- Top 26-50% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- Top 51%-75% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- Bottom 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
* ESG Ratings of PLCs in FBM EMAS that have been assessed by FTSE Russell in accordance with FTSE Russell ESG Ratings Methodology
