Siloam International Hospitals (SILO.IJ Rp 2,380; BUY TP Rp2,850) Trimming Our FY25-26F Net Profit Est. by 7%; LT Revenue Intensity Growth Outlook Remains Intact

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Siloam International Hospitals (SILO IJ)

Trimming Our FY25-26F Net Profit Est. by 7%; LT Revenue Intensity Growth Outlook Remains Intact

Weak volume seasonality and elevated salary/drug costs dragged down 1Q25 net profit, only partially offset by higher private patients mixes.
We trimmed our FY25F/26F Net Profit by 7% but see the long-term outlook of stable revenue intensity growth remaining intact.
Maintain our Buy rating with a slightly lower DCF-based TP of Rp2,850. Risk could come from the impact of leverage on leased assets buyback.

Weak Seasonality and Elevated Salary/Drug Costs Dragged 1Q25 Profit

SILO’s 1Q25 net profit of Rp246bn (+1,698% yoy, core profit: -25% yoy), only formed 21%/18% of our/cons FY25F estimates of Rp1.2tr/Rp1.4tr. Revenue was flattish at +0.3% yoy, dragged down by -5%yoy decline in Inpatient (IP) segment, primarily due to a high base last year and weak Ramadhan seasonality (IP Days -10% yoy). An elevated salary/drug costs as % of revenue (+140bps/+120bps on a yoy basis, compared to MIKA +70bps/-110bps yoy, HEAL +40bps/+160bps yoy) further pressured operating margin (-320bps yoy) and dragged down net profit. This is despite the higher growth in SILO’s non-BPJS patient segment (contribution to revenue increased 60bps yoy to 82.6% in 1Q25 (Exhibit 3), which we observed similarly happened in HEAL and MIKA, caused by tighter BPJS verification.

Trimming our FY25F/26F Net Profit by 7%

Incorporating the lower IP volume and elevated salary costs (considering also potential pre-operating costs from SILO’s 4 hospitals expansion this year), we trimmed our FY25F/26F net profit by 7% to Rp1.1tr/Rp1.3tr. However, we still see SILO’s long-term outlook of stable revenue intensity growth as intact, coming from its continuous progress to attract higher complexity cases through; 1) A new categorization of hospitals aiming to serve all vertical segments of Indonesian patients, 2) Expansion into AI, biotech, ambulatory care, and personalized medicine (Exhibit 14).

Maintain Buy with a lower TP of Rp2,850

We maintain our Buy rating yet lower our DCF-derived TP to Rp2,850. SILO currently trades at attractive 10.6x FY25F EV/EBITDA (vs. HEAL 13.5x vs. MIKA 19.0) (Exhibit 8), with laggard YTD price performance (-22%) vs. MIKA (+6%) vs. HEAL (-1%) and lower fund ownership (Exhibit 10). Long-term stories should remain attractive, while in ST the market still awaits the decision to acquire hospitals under lease to FirstREITS. Our initial estimates suggest a potential 17%/14% downside risks to FY25F/26F EBIT.

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