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Chularat Hospital PCL: Profit forecast upgrade prompts call upgrade

  • Earnings forecasts upgraded
  • New growth opportunity with asset-lite business model
  • Two new hospitals set to mark black ink for this year

We have shifted up our CHG call from HOLD to BUY with a new YE21 DCF-derived target price of Bt3.90 (7.0% WACC and 2.0% terminal growth), up from Bt3.30, due to profit forecast upgrades. The stock price has risen 41% YTD, but we think it will rally further, driven by a new record core profit for 2Q21 and street projection upgrade flows and valuation re-ratings. CHG currently trades at a 2021 PER of 32.1x, a 17% discount to long-term mean of 38.6x.

Earnings forecasts upgraded

We have upped our core profit forecast by 18% for 2021 (and by 15% for 2022), due to the following changes to our 2021 assumptions—increases of 7% to 2021 healthcare revenue and 60bps to GM (to 33.4%) and a 1.2% lower SG&A/sales ratio (to 11.1%), thanks to economies-of-scale. We now expect healthcare revenue growth of 22% YoY to a record of Bt6.7bn (and 6% growth in 2022). Core margin should hit a seven-year high of 17.8% (but still below the 2013 peak of 18.4%—pre-portfolio expansion). Our model points to hefty profit growth of 35% for 2021. We also see scope for upside to the current consensus 2021 earnings forecast of 5-10%.


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