Mitra Keluarga Karyasehat (MIKA IJ)

Resilient 1Q25 Earnings Amid Weak Seasonality Reinforce Our “Value Proposition” Thesis

• MIKA’s 1Q25 earnings reflected its successful effort to increase higher-complexity cases and cost efficiency amid low seasonality.
• MIKA maintained a double-digit top-line growth guidance yet flagged potential drug/salary costs hike due to weakened IDR and new hospitals.
• We slightly trimmed FY25-27F est, yet maintaining our Buy rating with a lower TP of Rp3,200. Weak volume/intensity risks have largely priced-in.

Non-BPJS Business Underpinned Resilient Results Amid Weak Seasonality

MIKA’s 1Q25 net profit of Rp311bn (+8% yoy, +14% qoq, forming 24%/25% of Our/Cons FY25F) reflected its efforts to increase higher-complexity cases (Average Revenue/IP Days +15% yoy, portion of private patients +4% to 88% to total revenue), despite low seasonality. This was supported by ongoing efficiency efforts in drug costs through annual supplier negotiations, leveraging its business scale. Despite soft top-line growth of 2% yoy — due to lower volume impacted by fewer working days and a weakened BPJS business caused by tighter compliance — MIKA still managed to expand its EBITDA margin by ~60bps to ~38%, driven by higher drug gross margin (51% vs. 46% in 1Q24).

Management Maintained Guidance of Double-Digit Growth on the Top-Line

Management maintained their guidance of double-digit revenue growth (closer to the lower end of 10% yoy), driven primarily by growth in revenue intensity, and further EBITDA margin expansion — despite acknowledging potential salary cost increases from 4 new hospitals (Exhibit 11). Mgmt also flagged potential drug cost inflation due to a weakened IDR, despite operating under a cost-plus pricing model. MIKA aims to push Kasih Group to target corporate patients currently under cost-efficiency measures (e.g., cement/infra companies), to help offset potential ongoing pressure in BPJS volume. Apr25 volume has shown recovery starting from the second week.

Maintain Buy with a Lower TP of Rp3,200; Risks Should Largely Be Priced-In

We slightly trimmed our FY25-27F net profit estimates by 2-11% and TP to Rp3,200, reflecting risks of prolonged weakness in BPJS volume and competition risks in the non-BPJS segment due to higher ASPs — especially in light of potential drug cost increases. Despite this, we believe the current valuation of 17.6x FY25F EV/EBITDA (-2SD of its 5-year mean, and only a 31% premium versus HEAL at 9.7x and SILO at 11.1x) has largely priced in risks of weaker intensity/ volume. This reinforces our thesis of MIKA’s value proposition and has us reiterating our Buy rating. Risk includes low share liquidity and cost-control execution.

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