6 Analysts Rate “BUY” on EKH in Advance of Country Reopening-China’s Three-Child Policy

Following an increase in demand for Covid-19-related services and Thailand’s anticipated reopening of the country to foreign tourists in 120 days, six analysts recommend “BUY” on Ekachai Medical Care Public Company Limited (EKH), citing an improvement in IVF (EKI-IVF Fertility & Genetic Center) clients back by the return of foreign visitors. 

EKH is also projected to benefit from  China’s three-child policy. This will boost the number of IVF clients and also enable the company to meet its 20% revenue growth target for this year.

At the end of May, China made a major change by lifting the cap on births policy from two children per household to three in an attempt to raise the country’s birth rates as the limit on reproductions could jeopardize its fast-growing economy.

However, the country’s opening should be continuously monitored to ensure that the approach is carried out successfully. Additionally, it is critical to track the number of people infected with COVID-19 following the country’s opening.

KTBST Securities (KTBST) raised a target price of EKH to 7.70 baht from 7.00 baht based on DCF (WACC of 9% and terminal growth of 3%), which is equivalent to 2021E PER of 24x. KTBST had a more positive view of the company’s guidance at a group conference call held yesterday (June 17). 

First, the company set a 2021E revenue growth target of +20%YoY with the IVF business to improve in 4Q21E given the Thai government’s plan to lift the Covid-19-related entry restrictions and China’s three-child policy. Last, the number of Covid-19 screening tests is an average of 150 per day and Covid-19 treatment capacity is 120 beds with utilization at 85%, currently. 

KTBST upgraded 2021E/2022E net profit forecast by 69%/18% to 194 million baht (+169% YoY)/177 million baht (-9%) as it revised up IPD/OPD revenue forecast by 38%/33% to  reflect strong revenue from COVID-19 in 2Q21E. KTBST, however, keeps its view unchanged that the IVF business could see improvement in 4Q21E and accelerate in 2022E on the back of China’s three-child policy. 

EKH’s share price gained 16% over the past three months, thereby outperforming the SET Index by 13%. The stock currently trades at 2021E PER of 21x, which implies -1.5 SD below its 5-yr average. A further development on the prospect of Covid-19 entry relaxation will provide support to the company’s IVF business and thus earnings performance.

Securities	Recommendation	Target Price
Finansia Syrus	BUY	8.40 Baht
KTBST	BUY	7.70 Baht
Phillip (Thailand)	BUY	8.10 Baht
Land and House	BUY	8.10 Baht
UOB Kay Hian	BUY	8.00 Baht
RHB (Thailand)	BUY	8.00 Baht