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23 Juli 2021

Indonesia Pharmaceutical & Healthcare Update - July 23, 2021

CREATING AN INTEGRATED HEALTHCARE ECOSYSTEM

 

Indonesia’s Healthcare Industry Set to Grow
A Welcome Move: Higher budget allocation for healthcare in FY21E to IDR215tn from initial budget of around IDR194tn. The spending will go to various programs such as diagnostics, testing and tracing, health equipment, procurement of medicines and vaccines, Covid-19 hospital treatment and a financial incentive for healthcare workers. Government spending for the healthcare budget continues to rise with 18.3% growth (CAGR 2016-2021), indicating the higher demand for healthcare services and products, which will benefit pharmaceutical, hospital, clinical lab and medical player.

Government Incentives Scheme to Boost the Sector
Indonesian Government seems more committed than ever to Fully Reforming the Sector. Indonesia’s pharmaceutical market is ranked the largest market in the ASEAN regions, with the market value expected to hit IDR141.6tn (USD10.11bn) by FY21E, despite Indonesia's healthcare expenditure per GDP is lower than its peers. Hence, the government has taken numerous measures to respond to the Covid-19 pandemic and supports the healthcare sector by providing incentives through several regulations.

Latest Impact of Covid-19: Lower Shock to India and Indonesia Stock Index
India made a headline on the public media after recorded surge in daily COVID-19 case to >400k. Previously it create bad sentiment to the current recovery development. However we assess that the negative impact of surged cases did not impact the stock market significantly likes in 2020.

Indonesian Pharmaceutical Growth Sees Rapid Expansion
As one of the world’s most-populous country with a fast growing economy, Indonesia is turning into an important market for pharmaceuticals. According to IQVIA, the Indonesian pharmaceutical market is forecast to grow at a compound annual growth rate (CAGR) of 6.3% (±2.5%) between 2016 and 2021, reaching IDR82,13tn (USD5.87bn) by FY21E. Meanwhile, Global Data survey expects the Indonesian pharmaceutical market to reach IDR141.6tn (USD10.11bn) by FY21E. One significant driver of pharmaceutical growth is the Indonesia’s Universal Healthcare Program (JKN) rollout which covers up to 82.3% Indonesian population in Mar-2021.

Indonesia’s Digital Health Ecosystem is Rapidly Growing

Telemedicine will become part of the new normal

Hospital & Lab Stellar Performance
Most benefitted from Covid-19 : healthcare sector successfully recorded a stellar performance in 1Q21. Net profit grew by more than +374.34% YoY as supported by higher hospital occupancy during COVID-19. Creative strategy to offer service for COVID-19 patients at home will be another additional booster for the performance in 2Q21. Top picks : MIKA, HEAL, PRDA

Key ratio comparison between pharma companies in Indonesia
KLBF, TSPC and SIDO still posted solid performances throughout 2020. In terms of net margin, SIDO led by 28% NPM followed by KLBF with 11.83% and TSPC at 7.18%. Valuation wise, KLBF and TSPC are currently trades at -1.5STD PE & PBV (5 yrs average), offers an impressive upside potential. Top picks : TSPC, SIDO, KLBF. Swing Trade: KAEF INAF.

 

Diclaimer

 

TSPC, SIDO, KLBF. KAEF, INAF, MIKA, HEAL, PRDA

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