Shifa International Hospitals Limited (SHFA)

Research Team

Table of Contents

In the fiscal year 2023, the company exhibited a robust financial performance marked by a 22% increase in revenue, reaching PKR 19,721 million.

This growth trend extended to the fourth quarter of FY23, where revenue stood at PKR 5,007 million, reflecting a notable 23% increase compared to the same quarter in the previous fiscal year.

Despite a 3% dip in other income for FY23, the firm demonstrated a consistent upward trajectory in its overall revenue.

However, the cost side of the equation saw parallel increases. Operating costs for FY23 rose by 21% to PKR 17,873 million, with the fourth quarter showing a 19% increase to PKR 4,622 million.

Similarly, finance costs escalated by 21% in FY23, amounting to PKR 463 million, while the fourth quarter experienced a 13% rise, reaching PKR 120 million.

A contrasting trend emerged in expected credit losses, which decreased by 17% for FY23 (PKR 57 million) and a substantial 67% for the fourth quarter (PKR 18 million). This reduction in expected credit losses might indicate improved risk management.

Despite the positive revenue growth, the company faced challenges in profitability. While profit before taxation increased by 22% to PKR 1,946 million in FY23, the fourth quarter saw a more significant surge of 31%, reaching PKR 324 million.

However, the effective tax rate saw a substantial uptick, reaching 39% for FY23 and a noteworthy 91% for the fourth quarter, suggesting increased tax obligations.

The bottom line showed a modest 2% increase in profit after taxation for FY23 (PKR 1,181 million), but a considerable 73% decrease in the fourth quarter, dropping to PKR 29 million.

This translated to an earnings per share (EPS) of PKR 18.7 for FY23, reflecting a 2% growth, and a decrease of 73% to PKR 0.5 for the fourth quarter compared to the same period in FY22.

These financial indicators collectively present a nuanced picture of the company’s performance, highlighting both areas of strength and challenges.

Shifa International operates as a comprehensive healthcare provider with a specialization in transplant services and complex surgeries, primarily at H8 hospital with additional research facilities.

In addition to healthcare provision, Shifa International is actively involved in education, with a training program for 400 postgraduate participants, and research and development, including chemical trials. Recognized as one of the leading employers in the healthcare industry,
Shifa International strives to attract top professionals to ensure the delivery of the best services. Continuous efforts are made to create an optimal working environment for healthcare professionals.

Business expansion and diversification are key components of Shifa International’s strategy, with a focus on providing cutting-edge services such as chemotherapy and oncology and expanding into areas like lung transplant. Efforts are also underway to establish partnerships with institutions, implement an enterprise system, and set up hospitals in other cities, including Faisalabad.

The integration of technology plays a crucial role, as Shifa International seeks to bridge gaps in healthcare and blend technology with quality healthcare. Initiatives like the eShifa program aim to extend services to remote patients and reduce costs.

Operational updates reveal positive performance in the first quarter and smooth operations in the second quarter, with transparency being a guiding principle. Future projects, such as the Faisalabad project, are progressing at a slow and steady pace, with a commitment to maintaining international standards. Pricing strategies are regularly updated based on costs, with challenges in passing on rising costs to patients while maintaining competitiveness.

In conclusion, Shifa International remains committed to sustainable growth, continuous improvement, and the provision of high-quality healthcare services. Environmental responsibility is emphasized through a commitment to international standards, exemplified by the installation of a 1MW solar plant.

Despite positive trends, Shifa International faces financial challenges, including the impact of devaluation on import costs, super taxation affecting profitability, and operational cost increases outpacing top-line growth. Financial ratios indicate a debt equity ratio of 19:81 and a current ratio of 0.99.

Important Disclosures

Disclaimer: This report has been prepared by Chase Securities Pakistan (Private) Limited and is provided for information purposes only. Under no circumstances, this is to be used or considered as an offer to sell or solicitation or any offer to buy. While reasonable care has been taken to ensure that the information contained in this report is not untrue or misleading at the time of its publication, Chase Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time, Chase Securities and/or any of its officers or directors may, as permitted by applicable laws, have a position, or otherwise be interested in any transaction, in any securities directly or indirectly subject of this report Chase Securities as a firm may have business relationships, including investment banking relationships with the companies referred to in this report This report is provided only for the information of professional advisers who are expected to make their own investment decisions without undue reliance on this report and Chase Securities accepts no responsibility whatsoever for any direct or indirect consequential loss arising from any use of this report or its contents At the same time, it should be noted that investments in capital markets are also subject to market risks This report may not be reproduced, distributed or published by any recipient for any purpose.

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