Thursday 28 Mar 2024
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KUALA LUMPUR (June 7): RHB Investment Bank Bhd (RHB IB) has maintained its “overweight” call on the healthcare sector, after it observed a pickup in hospital activities amid inflationary pressure in the first quarter of 2023 (1Q2023). 

RHB IB analyst Oong Chun Sung said consumer demand appeared resilient with patient growth seen in 1Q2023, with KPJ Healthcare Bhd notching a 0.1% increase on a quarterly basis, and IHH Healthcare Bhd logging a 3% uptick quarter-on-quarter.

He said a pickup in export sales as well as robust procurement activities from the public and private sectors also benefited pharmaceutical players under RHB IB’s coverage, namely Duopharma Biotech Bhd and Kotra Industries Bhd. 

Among healthcare stocks, Oong said KPJ Healthcare remains RHB IB’s top pick, with a target price of RM1.46, due to the group’s organic expansionary strategy to drive patient growth, minimised impact by nursing staff shortages, and a gradual increase in health tourism. 

“As we remain sanguine on healthcare service providers, we think KPJ Healthcare’s greater domestic focus offers better earnings stability,” he wrote in a note on Wednesday (June 7). 

“KPJ Healthcare’s 1Q2023 core earnings more than doubled, as an increased bed occupancy rate of 23 percentage points year-on-year (y-o-y) to 70% led to better operating efficiency, coupled with increased inpatient visits (+39% y-o-y) from a more complex case mix during the quarter.” 

Meanwhile, for the pharmaceutical sector, Oong believes the momentum of drug restocking activities — especially for the consumer healthcare segment and over-the-counter products — will normalise in the second half of 2023, as restocking activities taper off with concerns over drug shortages dissipating.

“Duopharma Biotech and Kotra Industries continued to demonstrate a resilient margin performance, which we think was largely associated with the drug makers’ timely average sales price adjustment, coupled with the easing of logistics costs,” he said. 

At the time of writing on Wednesday, KPJ Healthcare was trading three sen lower at RM1.13, bringing it a market capitalisation of RM5.12 billion. IHH Healthcare was also down 14 sen to RM5.74, valuing the group at RM50.55 billion.

Duopharma Biotech decreased a sen to RM1.35, holding a market capitalisation of RM1.3 billion. Kotra Industries was unchanged at RM5.31, valuing it at RM786.1 million.

Edited ByLam Jian Wyn
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