Dallah’s Q2 profit came in line with estimates, says Al-Rajhi Cap

Dallah Healthcare Holding Co.’s Q2 2017 net profit grew by 29.4 percent year-on-year (YoY) to SAR 70 million, in line with Al Rajhi Capital's estimates of SAR 68 million, the brokerage said in an earnings review.

“The bottom line growth is supported by cost savings in general, administrative and marketing expenses, and some one-off impairment charge in Q2 2016, which depressed earnings in the comparable period,” Al-Rajhi Capital added.

Second-quarter revenue stood at SAR 289 million, backed by improved contractual terms and a rise in number of medical procedures though Eid al-fitr fell in this quarter.

Profit margins expanded on Dallah’s cost saving policies and partly also on restructuring of Dallah Pharma.

The healthcare service provider’s bed capacity is expected to increase from 422 to nearly 1,072, with its clinics rising to 564 from current 204, driven by Dallah Hospital in Riyadh and Namar Hospital, which are still under construction.

Another deal was inked by the company to build a hospital in Jeddah.

“These expansions will ensure strong top and bottom line growth for the company for the next 3-4 years,” the brokerage firm added.  

Profit margins, however, are forecast to see pressure in 2018 and 2019, due to the new hospitals, ahead of improving later on when the utilization of the new hospitals normalizes.

Al-Rajhi Capital affirmed its “neutral” rating on the stock, raising its target price to SAR 115 from SAR 105.