IHH Healthcare Bhd has received mixed analyst calls following its recent performance, with MIDF Amanah Investment Bank Bhd (MIDF Research) downgrading the IHH's stock call to a NEUTRAL from BUY while RHB Investment Bank Bhd (RHB Research) maintained its BUY recommendation. MIDF Research raised its target price to RM7.56 from RM7.35, citing IHH's stronger-than-expected 9MFY24 results, where normalised earnings rose 42% year-on-year.
However, MIDF Research cautioned about limited upside in the near term, pointing to risks such as economic instability, rising operational costs and geopolitical challenges. In contrast, RHB Research revised its target price to RM9.10 from RM8.80, highlighting sustained demand for healthcare services, an improved case mix, and IHH's robust expansion strategy, particularly in Malaysia and India.
IHH's 9MFY24 results were impressive, with revenue rising 13.1% year-on-year to RM17.7 billion. The hospital and healthcare division saw a 15.7% revenue increase, driven by higher inpatient visits and price adjustments to counter inflation. Normalised earnings surged by 41.9%, exceeding expectations, while the laboratory division posted strong growth, with a 5.6% increase in revenue and 5.5% growth in EBITDA. Despite higher staff costs and inflationary pressures, IHH's performance remains solid, with a strong demand for healthcare services continuing across its key markets.
RHB Research highlighted that IHH's strategic expansion, including a 33% increase in bed capacity by 2028, positions the company well for future growth. The house remains optimistic about IHH's prospects, especially given its well-established regional footprint and resilient demand for healthcare services. RHB Research also raised its earnings estimates for 2024-2026 by 5%, 7% and 5%, respectively, reflecting confidence in the company's long-term growth trajectory.
On the other hand, MIDF Research acknowledges IHH's strong performance but remains cautious due to the limited upside in the short term, with risks such as economic instability, rising operational costs, and potential policy changes affecting its operations in Turkey and other international markets. MIDF Research also noted that while the company's recent acquisitions and expansion plans are promising, the stock's recent price appreciation may limit further near-term gains.
Both analysts agreed on IHH's strong position in the healthcare sector, but their outlook diverges, with RHB Research maintaining a more positive view, while MIDF Research takes a more conservative stance in the short term.
