National Medical Care Co.’s (Care) Q3 2020 net profit of SAR 16.3 million missed Aljazira Capital’s and consensus estimates of SAR 20.6 million and SAR 22.9 million, respectively.
Care’s revenue growth could moderate from current levels, while margins are expected to remain relatively stable, the brokerage said, adding it still remains positive on the company from a long-term perspective.
In the medium term, improvement in margins through cost-control measures and revenue growth through capacity addition at Care National Hospital (CNH) is likely to be the key drivers of growth.
In addition, Care plans to increase its capacity in Riyadh Care Hospital and CNH, which is expected to drive growth in the medium-term. However, there are no other announced major expansion plans, which may limit the company’s ability to capitalize on the potential long term demand growth for healthcare.
However, a high percentage of receivables from government and semi-government entities (72% of receivables in FY 2019) remain a major concern for Care.
Aljazira Capital revised its stock rating to “neutral” due to a limited upside from current levels, but maintaining the target price at SAR 58.6 a share.
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