Equity Analysis /
Saudi Arabia

Saudi German Hospital: Q1 22 earnings call summary

  • In Q1 22, revenues grew 22.7% yoy to SAR513mn.

  • Gross profit increased by 34% yoy in Q1 22, leading to a margin expansion to 32.1% vs 29.4% in Q1 21.

  • The management expects higher sales starting from Q2 22 as new clinics will start operations.

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

SNB Capital
26 May 2022
Published by

Revenues

  • In Q1 22, revenues grew 22.7% yoy to SAR513mn. The growth was due to revised prices with key customers, recovery in patients’ visits – both inpatients and outpatients.

  • Inpatients increased by 15% yoy to c18k in Q1 22 compared to c16k in Q1 21, signaling a recovery.

  • Outpatients’ visits increased with an improved rate of 23% yoy to 373k compared to less than c300k in Q1 21. Outpatients increase was largely driven by insurance and cash segments.

  • The number of surgeries performed in the quarter were close to 10k which is similar to Q1 21.

  • The recovery was largely driven by insurance business segment and supported by resumption of religious tourism.

  • Insurance contributed to 53% of the total revenues being the largest contributor, while MoH remains the second largest contributor with 22% of revenues, while cash contribution was at 21%.

  • Jeddah remains the largest contributor with 34% of revenues followed by Riyadh and Aseer which contributed 19% and 18%, respectively.

 Operations

  • Gross profit increased by 34% yoy in Q1 22, leading to a margin expansion to 32.1% vs 29.4% in Q1 21.

  • EBITDA also increased by 102% yoy in Q1 22 to SAR35mn and EBITDA margin improved to 6.9% compared to 4.2% in Q1 21. The management, however, believes the profitability could have been better as it was impacted by higher salaries of SAR125mn in Q1 22 compared to SAR99mn in Q1 21.

  • As a consequence of higher operating profits and margins, net profit also increased to SAR20mn while margins expanded to 3.9% compared to 2.2% in Q1 21.

  • Working capital decreased in Q1 22, and the management expects it to decline further.

  • The average length of stay in hospitals increased to 4.1 days in Q1 22 compared to only 3.7 days in Q1 21.

  • Moreover, there was improvement in beds and clinics utilization rate in Q1 22 to 63% and 62%, compared to 60% and 52% in Q1 21, respectively.

 Account receivables

  • The management stated that on request of MoH, they are currently conducting an audit of their receivables for this year and previous year.

 Update on expansion progress

  • Management expects the hospital in Makkah to be operational by Q4 22.

  • The one-day surgery hospital is already operational and has started taking cash patients.

  • The management expects two more clinics in Riyadh to be operational by the end of the year.

  • The Dammam facility will be operational by Q4 22.

 Guidance

  • The management expects higher sales starting from Q2 22 as new clinics will start operations.

  • The management believes that prices may increase up to 22%, from which 17% has already been realized.

  • The management added that they are well equipped to handle the pressure faced by insurance companies.

  • Operating expenses: The management stated that full year fixed costs will be 4.0x – 4.5x of what was incurred in Q1 22, but variable costs will be in proportion to sales growth.

  • The management is confident of reaching a 70% utilization rate; however, they cannot commit on the timeline as newly opened facilities generally have a lower utilization rate.