Medikaloka Hermina (HEAL.IJ Rp1,500; BUY TP Rp1,950) Solid 3Q25 Earnings Recovery; Controlled Costs from ERP Implementation to Support FY26F Margin

Stock Code	Last Price	Change	Change %
GGRM	14.850	650	4,58%
PANI	14.000	500	3,70%
FISH	2.160	430	24,86%
PTRO	6.950	400	6,11%
PGUN	14.250	350	2,52%
TCPI	7.650	350	4,79%
BBCA	8.575	300	3,63%
MDKA	2.430	260	11,98%

Medikaloka Hermina (HEAL IJ)

Solid 3Q25 Earnings Recovery; Controlled Costs from ERP Implementation to Support FY26F Margin

9M25 PATMI beat our estimates (83% of FY25F) supported by more working days boosting IP admissions and controlled salary costs.
We raised our: 1) FY25F revenue to +5% yoy (from +3%), 2) FY26F PATMI by +9%, as full ERP rollout to potentially contain salary cost growth.
We maintain Buy rating with a slightly higher DCF-based TP of Rp1,950 (prev. Rp1,850); the LT margin expansion story remains intact.

9M25 Beat Our Estimates from Volume Recovery and Salary Costs Efficiency

HEAL’s 3Q25 net profit of Rp131bn (+31% qoq, +5% yoy) beat our estimates of Rp119bn, bringing 9M25 PATMI to Rp356bn (-24% yoy), or 83%/69% of our/consensus FY25F forecasts (Rp429/519bn). Strong 3Q25 revenue growth (+12% qoq, +13% yoy) was driven by: 1) higher number of working days (58/51/64 in 1Q/2Q/3Q25) boosting IP admissions (+12% qoq vs. +5% qoq in 2Q25), and 2) corporate MCU season lifting OP Visits (+15% qoq vs. +0% qoq in 2Q25), though IP/OP intensity growth remained soft (+0%/-4% qoq). EBITDA margin rose +180bps qoq (vs. our +110bps estimates), supported by lower salary costs as % of revenue in COGS (-158bps qoq) and Opex (-82bps qoq), following the start of company’s ERP implementation.

Slight Raise on our FY25F Revenue; Full-ERP Rollout to Support FY26F Margin

Incorporating 3Q25 results, we raise our FY25F revenue growth to +5% yoy (from +3% yoy), as we see the strong volume recovery momentum continuing in 4Q25 (63 working days), while being cautious on year-end holiday impact. Our revised FY25F revenue of Rp7.0tr implies Rp1.8tr in 4Q25F (+5% yoy vs. +13% yoy in 3Q25). Meanwhile, while overall FY25F EBITDA margin will still be weighed by the costs of 4 new hospitals built in FY24, we see the start of ERP rollout, which evidently lowered salary costs as % of revenue in 3Q25, could further support margin expansion in FY26F once fully implemented. Thus, we lower our salary costs assumptions (% of revenue) in FY26F/27F by -130/-140bps, lifting PATMI by +9%/+18% to Rp555/645bn, while revenue ests. are maintained at Rp7.8/8.7tr.

Maintain Buy with TP Rp1,950; LT Margin Expansion Story Intact

We maintain our Buy rating on HEAL with a slightly higher DCF-based TP of Rp1,950 (vs. Rp1,850 prev.). We view its FY25F revenue target miss (vs. mgmt’s +16-17% yoy) as largely anticipated (1H25 cons. +7% yoy), while the delay in realization of higher revenue intensity through KRIS and CoB implementation is largely priced-in. We see HEAL’s LT margin expansion story through: 1) volume-driven economies of scale, 2) KRIS-CoB uplifting revenue intensity, 3) non-hospital business 4) higher OP volume through Djarum-Astra synergy, remaining intact. Key risks: overrun capex and costs (~16 new hospitals FY26F-FY30F), execution of private patient penetration, and persistent tight BPJS claim.

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