EKH Gains 6%, Analyst Recomm. “BUY” at ฿6 on Stronger Earnings Outlook in 4Q20

EKH Gains 6%, Analyst Recomm. “BUY” at ฿6 on Stronger Earnings Outlook in 4Q20

The share price of EKH jumped ฿0.26/share or 5.51% to ฿4.98/share with a trading value of 6.8 million baht. 


KTB Securities (Thailand) upgraded its rating on Ekachai Medical Care Public Company Limited (EKH) to “BUY” and a target price to ฿6.00/share from ฿5.80/share as 4Q20E earnings to improve on higher IPD capacity utilization and Covid-19 tests.


KTBST is increasingly positive about EKHs earnings outlook following the company’s guidance at a group conference call held yesterday (December 24). First, EKH expects a limited impact from the partial lockdown due to a new round of COVID-19 outbreak in Samutsakorn province, as i) the number of IPDs/OPDs remains favorable, unlike a drastic drop in 2Q20 when the COVID-19 spread into Thailand, and ii) IPD capacity utilization has increased to 70% QTD from 40% in 3Q20 due to the RSV outbreak among children. 


Second, KTBST forecasts revenue from COVID-19 laboratory tests to reach Bt20.0mn, assuming the number of COVID-19 tests is 500 cases per day for 11 days (December 20-31). Last, IVF cases have gradually improved.


KTBST thus raised its 2020-21E net profit forecast by 50-4% to Bt52.0-96.0mn, respectively, as 1) KTBST revised up its gross profit margin estimate to reflect higher IPD capacity utilization, and 2) KTBST cut its SG&A expense forecast by 23% to Bt142mn from Bt185mn.


EKHs share price gained in the three-month timeframe but was an underperformer of the SET Index by 10%. The stocks valuation currently looks attractive, trading at 2021E PER of 29x, which is -0.75 SD below its 5-yr average level of 47x and well below its peers average level of 40x. KTBST foresees a stronger earnings outlook given rising IPDs.


The target price increases to Bt6.00 from Bt5.80 based on the DCF method, assuming WACC of 9% and terminal growth of 3%. Escalation of the new round of COVID-19 outbreak is a major downside risk to our earnings forecast, which would result in IVF cases declining.