How did Sulaiman Al Habib post record interim profits in Q3 2024?

Logo of Dr. Sulaiman Al Habib Medical Services Group (HMG)

Dr. Sulaiman Al Habib Medical Services Group (HMG) posted record profits of SAR 595.5 million in Q3 2024, thanks to the collective revenue growth of the hospitals and pharmacies segments.

Argaam Charts showed that the Saudi-listed healthcare company's improved financial performance in Q3 2024 was driven by new hospitals openings this year and the higher profit margins of hospitals opened over the past years, amid better operating performance.

It also showed that Sulaiman Al Habib’s portfolio boasts seven existing hospitals now operating at full capacity. While three new hospitals are still in the early stages of operations, the company expects them to reach full capacity within the next two years.

The company reported a 24% annual hike in the healthcare services segment’s revenue. This growth was attributed to increased occupancy and patient visits, along with the positive impact of the recently-introduced West Jeddah and Al Faihaa hospitals, alongside the opening of the North Riyadh hospital, not to mention the ongoing positive impact of the opening of the two Riyadh-based centers in 2023.

However, the company’s third-quarter revenue growth put pressure on profit margins, which declined by 1.3% to 35.3% for the three-month period amid higher expenses given the ongoing expansions.

Sulaiman Al Habib’s pharmacy segment saw a 25% year-on-year (YoY) revenue rise in Q3 2024. However, according to Argaam Charts, the segment’s profit margins plunged by 0.9% to an all-time low of 29.2% during the quarter due to rising direct costs.

Despite this, the company still plans to open over 10 new pharmacy branches this year.

Several factors contributed to the company's Q3 2034 profit growth, including revenues hitting a fresh record of SAR 2.97 billion during the three-month period thanks to the opening of new hospitals.

However, Sulaiman Al Habib’s third-quarter profit growth was capped by the decline in profit margins to the lowest level since Q4 2022 at 33.3%. Operating expenses also increased by 34% YoY to an all-time high of SAR 301.8 million for the same period on the company’s ongoing expansion activities. Moreover, other income contracted by 23% YoY to SAR 35.3 million by the end of the quarter.

Higher financing costs (FCs), which nearly doubled YoY to SAR 50.9 million in Q3 2024 due to the elevated loan balance and lease obligations incurred to fund hospital expansions, also put pressure on the company’s three-month bottom line.

The company's interest coverage ratio slumped to its lowest level in a while to 12.3 times in the current quarter, down from 31.5 times in the previous year. This drop was primarily due to the increase in FCs outpaced that of the operating income in tandem with securing new facilities to fund its planned expansions amid higher prevailing interest rates.

Argaam Charts indicated that Sulaiman Al Habib secured the highest market value among sector peers, reaching SAR 95 billion by the close of trading on Nov. 19.