Large hospitals outperform in Thailand as overseas patients drive profits in Q1: research

UOB Kay Hian said the rest of 2023 will be challenging for the entire healthcare sector.

Thailand’s healthcare sector ended mixed in the first quarter as large publicly-listed hospitals benefited from the medical tourism rebound while earnings of mid-sized firms reliant on the domestic market were hurt, according to UOB Kay Hian. 

Thai healthcare firms covered by the brokerage booked THB5.7b (US$160m) in overall net profit last quarter, down 28% from a year ago on the absence of contribution from COVID-19. When compared to the preceding three months, last quarter’s total went up by 5% driven by the recovering volume of international patients.

“An observable disparity in performance was observed between large hospitals with significant contribution from international patients and medium-sized hospitals with most contribution from the domestic segment,” it said in a research note published 23 May.

The influx of overseas patients mostly benefited large hospitals like Bangkok Dusit Medical Services and Bumrungrad Hospital, which reported 5% to 7% earnings growth as well as higher-than-expected gross margins last quarter.

It said the growth was boosted further by higher revenue intensity and lower depreciation expenses of existing medical equipment and facilities.

For mid-size healthcare providers with heavy exposure to the domestic market and the government’s Social Security Office scheme, earnings went down year on year due to the high base a year ago.

Lower margins especially from newly opened hospitals, rising utility expenses and inability to raise prices for their low- to middle-class patients have also dampened companies' bottom lines.

The segment’s gross margins even went about 3% below pre-pandemic levels, it said.

First-quarter earnings of Bangkok Chain Hospital and Chularat Hospital both missed analysts’ forecasts for the period by 35% and 10%, respectively.

For the rest of the year, UOB Kay Hian expects earnings growth to slow down across the board due to a high base last year, as well as a potential margin contraction amid growing staff members and rising wages.

It also cautioned of a tightening competition in the international patient segment as well as the anticipated policy changes in public healthcare, as the Southeast Asian nation transitions to a new leadership under the opposition Move Forward Party.