Earnings Report /
Saudi Arabia

Dr Sulaiman Al Habib: Strong results on higher top-line growth

  • Revenues grew 26.2% yoy (flat qoq) to SAR1.70bn and were higher than our estimates of SAR1.52bn

  • Gross profit increased 37.4% yoy (flat qoq) to SAR549mn and were higher than our estimates of SAR475mn

  • Net income improved due to growth in patient volumes, coupled with increased operational efficiencies

SNB Capital
26 April 2021
Published bySNB Capital

Dr. Sulaiman Al-Habib Medical Group (HMG) reported a strong set of Q1 21 results, with a net income of SAR319mn (up 29.4% yoy, flat qoq). This is higher than the NCBC and consensus estimates of SAR274mn and SAR300mn, respectively. The positive variance was primarily on account of higher than expected revenues of SAR1.70bn, up 26.2% yoy and compared to our estimates of SAR1.52bn. We believe higher than expected revenues were due to higher inpatient occupancy. Based on our last published update in November 2020, we are Neutral on HMG with a PT of SAR94.4. However, since our last update the stock has rallied c42% and is now trading at 2021f PE of 47.8x.

Revenues grew 26.2% yoy (flat qoq) to SAR1.70bn and were higher than our estimates of SAR1.52bn. We believe the growth in revenues is driven by 1) higher inpatients volume, 2) the improved performance of Al-Khobar hospital, 3) the ongoing travel restriction due to COVID-19 and 4) growth in pharmacy segment and HMG solutions segment.

Gross profit increased 37.4% yoy (flat qoq) to SAR549mn and were higher than our estimates of SAR475mn. Gross margins improved c265bps yoy (flat qoq) to 32.4% in Q1 21 vs our estimate of 31.2%.

Operating expense increased 41% yoy (-7.8% qoq) to SAR200mn and were marginally higher than our estimates of SAR186mn. Opex to sales stood at 12% vs 11% in Q1 20 and was in-line with our estimates.

Operating income stood at SAR350mn, up 35.2% yoy (6.3% qoq), higher than our estimates of SAR289mn. Operating income margin improved c140bps yoy to 20.6% in Q1 21, higher than our estimate of 19.0%.

Net income improved due to growth in-patient volumes, coupled with increased operational efficiencies. Net income margin recorded an increase of c50bps yoy to 18.8%, higher than our estimate of 18.0%.

Based on our last published update in November 2020, we are Neutral on HMG with a PT of SAR94.4. We believe that strong expansion pipeline, improved efficiency and growth of HMG solutions are the key earnings drivers going forward. However, since our last update the stock has rallied c42% and is now trading at 2021f PE of 47.8x.