Price adjustments are commonly followed by complaints — after all, no one likes to pay more for something they already consume. However, in the case of an increase in the values of health insuranceit is precisely this measure that could help save the sector’s shares on the stock market in 2024.
The healthcare segment was one of the sectors affected at B3 over the last three years due to the increase in accident rates. The term sounds scary, but it means nothing more than greater use of health plans by beneficiaries.
In the view of analysts, however, 2024 will be a year of recovery in results and margins. Between hospitals, laboratories and health plans, there are currently ten companies with shares listed on B3. But one of them emerged as the favorite of the analysts I spoke to.
Follow this report to understand what moves the healthcare sector on the stock market — and, of course, the company that should be highlighted on the stock market, according to experts.
It may seem counterintuitive, but while the coronavirus pandemic was at its peak, the number of patients in hospitals plummeted. In fact, it was only at the end of the Covid-19 health crisis that people actually started going to emergency rooms again.
The reduction in the hospital utilization rate in 2020 allowed plans to become more competitive and enter a price war in 2021 and 2022.
Turns out this soon became the perfect scenario for trouble. With the end of the pandemic, people went back to carrying out the procedures they had postponed and the accident rate reached heights: at the time, many operators even surpassed the 100% mark — in this indicator, also known by the acronym in English MRL, the higher the percentage, worse.
“Companies entered the year 2023 with a very pressured margin”, highlights Rafael Passos, from XP Investimentos.
The challenge for healthcare companies, therefore, was to restore the monthly plan fees without displeasing users too much.
In fact, last year, the sector began to show signs of recovery and improved profitability, with new positive adjustments — of more than 20% — in health plan prices and an increase in the operators’ average ticket.
“Operators preferred to stop fighting over price and try to seek profitability”, says Fernando Ferrer, an analyst at Empiricus. In this sense, the adjustments at the beginning of this year were a good sign — at least for the market. At the same time, the expectation is for less pressure on the cost side.
More adjustments to plans are coming — and that’s good for shareholders
In the view of Bank of America (BofA), the healthcare sector should present a lower medical loss ratio (MLR) in comparison in 2024 after recent increases in monthly fees.
According to analysts, the sector’s medical accident rate remains high at 87%, against a historical average of 82%.
Therefore, the bank predicts another cycle of aggressive price increases for health plans in 2024, with adjustments of more than 15%.
“We expect a significant improvement in accident rates, especially in the second half of the year, which should lead to an improvement in the sector’s working capital cycle (hospitals, laboratories and distributors).”
For Santander, profitability must remain the main focus of companies, supporting a more rational competitive environment.
For Genial Investimentos, healthcare companies should consolidate the recovery in 2024 and bring financial margins back to a healthy level.
Hapvida (HAPV3): Time to shine?
In the view of Bank of America analysts, lower interest rates should help the financial results of healthcare companies, especially in the case of more leveraged companies, such as Hapvida (HAPV3), Oncoclinics (ONCO3), Dasa (DASA3) It is Rede D’Or (RDOR3).
BofA set a target price of R$6.50 for HAPV3 over the next 12 months, implying a potential upside of 68.4%.
For analysts, Hapvida should reach the historic level of 68% in MLR in the second half of 2024, considering health plan price adjustments and greater efficiency with the integration of NotreDame Intermédica systems.
“The resumption of organic growth in 2H24 should be one of the pillars to strengthen the company’s growth thesis, reflecting a relief in the readjustment of health plan prices”, say the analysts.
In BofA’s accounts, Hapvida’s operational improvement should boost cash generation this year and help reduce the company’s leverage, currently at a multiple of 1.6 times the net debt/Ebitda ratio (earnings before interest, taxes, Depreciation and amortization).
Empiricus also lists Hapvida’s shares as one of the main bets in the healthcare sector — especially due to the company’s verticalization and the potential delivery of operational synergies with NotreDame Intermédica after the merger.
“A large part of its operation is owned, which increases cost control. Furthermore, Hapvida has been able to pass on prices and reduce accident rates. The company still has a very competitive price, so it ends up being the gateway for many beneficiaries who do not want to stay in the SUS”, evaluates analyst Fernando Ferrer.
Santander predicts that Hapvida can gain market share in a weak market, providing a stable membership base in 2024.
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The risks of Hapvida (HAPV3)
Genial, on the other hand, has a more conservative view for the shares, with a “maintain” recommendation for HAPV3 and preference for SulAmérica — currently under the umbrella of Rede D’Or (RDOR3) — in the health plan operator segment.
“We are still a bit behind on Hapvida in terms of profitability and growth, because they have always managed a lot of turnover in their portfolio of beneficiaries, which ended up boosting the growth of their revenues. So, with this reduction, it becomes more difficult to make the business profitable”, says Guilherme Vianna, stock analyst at Genial.
The number of Hapvida beneficiaries still raises concerns among analysts. This is because a slower-than-expected organic growth curve for beneficiaries could lead to a lower increase in revenues.
Furthermore, the Genial analyst highlights the risks caused by the investigation of the company by the Public Ministry of the State of São Paulo for failing to comply with court decisions favorable to health plan beneficiaries, hindering access to treatments for diseases, especially serious ones, such as cases of cancer. .
“The healthcare market works based on reputation, and there is a huge reputational risk among Hapvida beneficiaries if these accusations are confirmed”, says Vianna. “We don’t know how this action will go and we have no idea about the financial risk of this process.”
In fact, Hapvida shares started the year in the red and extended the drop to 9% in 2024 after the news about the alleged non-compliance with injunctions.
Other bets for the healthcare sector this year
Bank of America analysts highlight their preference for Oncoclínicas (ONCO3) shares in the healthcare sector, with a target price of R$16 (potential appreciation of 39.9%), and Fleury (FLRY3), with target of R$21 per paper (potential increase of 29.7%).
“The two companies with the greatest potential for growth in our coverage are ONCO3 and HAPV3. However, we recognize that both names have operational risks ahead. Adjusted for risk, we also like Fleury.”
And speaking of Oncoclínicas (ONCO3) and Fleury (FLRY3), these are XP Investimentos’ two biggest bets for this year.
In the case of the oncology ecosystem, XP believes that the company is “a little more protected from this most turbulent moment in the sector”.
“We have a good appreciation perspective for Oncoclínicas shares and we think that the company has all the pieces in place to deliver a good year and bring returns to investors.”
Among the laboratories, BofA analysts assess that Fleury “has been demonstrating consistency of results in the last year with expansion of volumes and margins” and will begin to reap the synergies of the merger with Hermes Pardini.
The Genial analyst has a similar view and projects that Fleury will still benefit in the long term from what he calls “dehospitalization” in Brazil.
“The thesis sees the creation of an integrated healthcare ecosystem with different medical specialties. With this, the beneficiary can always be part of Fleury’s circle.”
The risks for the healthcare sector
Despite analysts’ positive outlook for the healthcare segment in 2024, there are still risks — not only in the sector, but also macroeconomic ones.
Among them are a possible worsening of unemployment levels this year, in addition to a slower-than-expected cycle of cuts in the basic interest rate (Selic).
After all, many companies in the healthcare sector are in debt — and depend on interest relief to facilitate the deleveraging process.
In BofA’s view, discussions about new regulation are the main sectoral obstacle for healthcare companies for 2024.
Furthermore, analysts highlight the resumption of more aggressive price competition by operators.
“Some operators may want to return to organic growth and start a new price war, once again weakening the sector’s margins.”
The bank also highlights the reduction in the need for new beds, which limits the potential for organic expansion of players hospitals.