Mitra Keluarga Karyasehat (MIKA.IJ Rp 3,010; BUY; TP Rp 3,400) Proven strategy execution led to solid 1H24; expect sustainable earnings momentum in FY24-25F

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Mitra Keluarga Karyasehat (MIKA IJ)

Proven strategy execution led to solid 1H24; expect sustainable earnings momentum in FY24-25F

We believe MIKA’s solid 1H24 net profit of Rp601bn (+33%yoy) has demonstrated its execution of marketing and cost efficiency strategies.
We upgrade our FY24F/FY25F EPS forecast by +5%/+9%, with key revenue drivers from high-intensity cases and private patients.
We maintain our Buy rating on MIKA with a slightly higher TP of Rp3,400 on its attractive growth outlook.

Solid 1H24 earnings (inline) driven by higher margin and better payer mix

We believe MIKA’s solid 1H24 net profit of Rp601bn (53% of our and consensus estimates), driven by higher drug margins (exh.1) and a lower JKN payer mix (exh.4), has demonstrated the successful execution of management’s strategy to increase higher-intensity cases at an updated pricing level, while also shifting the payer mix to focus on private patients. In terms of patient volume, the 1H24 achievement (50% of our est.) is in-line with 1H historical seasonality (49-50% to FY), while revenue intensity grew 5-7% yoy (in-line with our estimate of 7-8%).

Improved revenue growth and margin driven by reorganization efforts Since 2H23, MIKA has reorganized its marketing team to focus separately on private insurance and corporate clients. This effort has led to a 24% yoy growth in covered patients’ business revenue, with overall marketing costs increasing by only +7% yoy in 1H24. We also noted a positive impact on gross margin in East Java operating segment (29% of total gross profit), which rose to 79% in 1H24 (1H23: 50%) as an increase in high-intensity cases has led to improved utilization of its Radiotherapy and Oncology Center of Excellences.

Expect sustainable earnings momentum in FY24F/FY25F

MIKA indicated that patient traffic starting from the 3^rd week of Jul24 has returned to normal post-school holiday season. Incorporating the 1H24 results, we raised our FY24F/FY25F net profit forecasts by +5%/+9%, as we believe that the proven execution of its growth strategy will remain intact.

Maintaining our Buy rating with a slightly higher TP of Rp3,400

We maintain our Buy rating on the company with a slightly higher TP of Rp3,400 (implying 25.3x/21.0 FY24F/FY25F EV/EBITDA). Given domestic funds’ still light positioning (exh.9), we believe the continuation of revenue growth momentum should further cement investor’s confidence in management and MIKA’s pricing power. Key risks include: 1) cost-efficiency effort by private insurance impacting patient volume; 2) higher opex in 2H24 (incurred pre-operating costs of FY25F newly opened hospitals, potentially diluting EBITDA margin by ~0.3-0.7%).

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