Nordea published its updated Terveystalo analysis. Recommendation (BUY) and target price (€11.00) remain unchanged.
Key downside risks: Increasing competition; availability and retention of key personnel; partnerships with insurance companies; and the outlook for occupational health and private healthcare services in a post-SOTE reform environment.
Terveystalo news ahead of the Q3 figures to be published on 25 October:
terveystalo-q3-2024-hiljaista-jaksoa-edeltava-uutiskirje.pdf (245.1 KB)
https://stm.fi/-/hallitus-uudistaa-kela-korvauksia → “The reforms concerning Kela reimbursements would come into effect in stages. The biggest change concerns those aged 65 and over, for whom the Ministry of Social Affairs and Health (STM) and Kela are preparing a nationwide freedom-of-choice pilot based on Kela reimbursements. The pilot includes a price cap.” → Well then, the government is planning changes to the much-maligned Kela reimbursement model. This would indicate that public sector demand will increasingly be offloaded using private sector resources. If the 65+ pilot in particular yields promising results and improves access to care, freedom of choice could, at its best, accelerate growth for Terveystalo. Of course, the reimbursements include a price cap, which is surely a nice thing from the taxpayer’s perspective (but not so much for the shareholder). On the other hand, if the pilot succeeds, the model would certainly have the potential to be expanded elsewhere, which could indeed open a real Pandora’s box in the world of freedom of choice (it might not make it within this government term, and a change of government could change the policy direction entirely).
It’s also a good sign that only about 10% of Terveystalo’s billing now consists of SOTE (public social and healthcare) sales. The massive savings implemented by the regions won’t hit the current quarters as hard. The same cannot be said for their competitors… I was at a fairly large private dental clinic in Tampere last week – there were maybe 3 patient encounters during my visit…
This KELA reform offers a great growth and upselling opportunity for Terveystalo, if successful, from the end of 2025 and onwards..
I was browsing the latest issue of Lääkärilehti (The Finnish Medical Journal) and this article caught my eye.
In short, the article features interviews with several self-employed practitioners working at private medical centers. Over the past ten years, the attitude of medical centers toward practitioners has hardened significantly. Rents and medical center fees are raised through unilateral “take it or leave it” decisions. For example, a medical center might negotiate a very cheap contract with a large employer—such as “€50 per doctor’s visit”—to win a tender. In such cases, the practitioner cannot bill the patient any more, and on top of this, the medical center takes its own, ever-increasing cut.
On the other hand, if a medical center raises the price of an occupational health visit by ten euros, for instance, the doctor’s share does not increase at all.
The article also mentioned that so-called facility shares (i.e., when you perform a procedure, the clinic takes its portion to cover overhead, instruments, etc.) have risen from a previous 1/3 to as much as 2/3, while the clinic has simultaneously significantly increased the prices of the procedures.
The interviewed doctors time this change in the behavior of medical centers to around the period of their stock market listings.
The private sector used to be a “gentleman’s profession” for the medical community, where pay levels, control over one’s work rhythm, and the lack of on-call duties were the biggest advantages.
Now, the tide might be turning. Some of those interviewed were considering returning to public healthcare.
Private medical centers are unlikely to lose all their employees, but this partially explains what has been done to improve profitability. Significant leaps in profitability are not made simply by “improving digital pathways” etc. in such labor-intensive sectors.
In my opinion, it also indicates that some kind of pain threshold has been reached or is being approached. If a mass exodus of doctors from the private sector to the public sector occurs, the private side will be in the same mess that the public sector has been in for the past few years.
As a taxpayer and a public sector employee, however, I wouldn’t consider that scenario a catastrophe.
Sijoittaja.fi has conducted an analysis of Terveystalo. 
Based on current forecasts, Terveystalo’s share valuation multiples are already quite attractive at this price level. The company’s EV/EBIT is only 15.0, and based on the 2024 EPS forecast and the closing price on October 10th, the share’s P/E ratio is 14.3. Analysts expect Terveystalo’s earnings growth to continue next year as well. Based on the 2025 earnings per share forecast (€0.78), the P/E ratio is 12.3.
The dividend paid by the company provides stability to Terveystalo’s share. The company is likely to maintain its growing dividend, especially if it achieves the anticipated earnings growth. Before the Q3 reporting season, analysts expect Terveystalo to distribute a dividend of 0.34 euros per share for the 2024 financial year (2023: 0.30 €). Based on the forecast, the share’s dividend yield is at a good level, 3.5 percent.
Note
IR-ikkuna is a channel for the corporate partners of SalkunRakentaja and Sijoittaja.fi for background and analytical articles as well as other interesting investor information. The article is part of a commercial collaboration with the company. The article does not contain investment recommendations.
Analyst’s preview of Terveystalo’s Q3 results. 
July–September 2024 in brief
January–September 2024 in brief
CEO Ville Iho: Strong profit growth continued, creating a solid foundation for future value creation
Terveystalo continued its strong performance in the third quarter of 2024. Our revenue grew by approximately 5 percent to EUR 296 million, and our profitability improved significantly compared to the comparison period. Our profit improvement measures have proven effective even during periods of seasonally lower demand. Adjusted EBITA grew by over 62 percent to EUR 34 million, corresponding to 11.6 percent of revenue. Our earnings per share quadrupled from the comparison period to EUR 0.12.
The excellent profit development in the Healthcare Services segment continued for the sixth consecutive quarter. Segment revenue grew by nearly 11 percent year-on-year, reaching EUR 232 million in the third quarter. Revenue growth was driven by strong supply, an improved sales mix, successful commercial measures, and an early and strong start to the flu season. Revenue increased across all customer groups. Growth and improved operational efficiency raised the segment’s adjusted EBITA by 67 percent to EUR 34 million, which was approximately 15 percent of revenue. The foundations of our core business are on solid ground and continue to strengthen. We will focus on profitable growth and strengthening services that create value for our customers, as well as medical quality and operational efficiency.
Profitability in Portfolio Businesses improved significantly despite a 10 percent decline in revenue. The segment’s adjusted EBITA grew by 70 percent year-on-year to approximately EUR 3 million, representing 6 percent of revenue. Segment revenue was approximately EUR 54 million. Loss-making outsourcing contracts have largely ended, and proactive customer selection has been implemented in staffing services to strengthen profitability. Demand for oral health services remains soft, and sales to the reorganized public market continue to progress slowly. New tenders have only been seen in digital services.
Financial guidance for 2024
Terveystalo estimates that its full-year 2024 revenue will increase (2023: EUR 1,286 million), and that adjusted earnings before interest, taxes, and amortization (EBITA) will be 12.0–12.5 percent of revenue (2023: 9.8 percent).
Briefing
Terveystalo will hold an English-language results webcast and conference call on Friday, October 25, 2024, at 10:30 a.m. EEST. The webcast can be followed at: https://terveystalo.videosync.fi/q3-2024
Petteri Lankinen appointed as Terveystalo’s Chief Medical Officer and member of the Executive Team.
Petteri Lankinen, b. 1981, MD, PhD, eMBA, has been appointed Chief Medical Officer and a member of the Executive Team at Terveystalo. He will start in the position by 25 January 2025 at the latest. Lankinen is a specialist in orthopaedics and traumatology and an adjunct professor. In his role, he reports to CEO Ville Iho. Prior to this appointment, Lankinen served as Chief Medical Officer and Senior Partner at Nordic Healthcare Group since 2023. Previously, he has served, among other roles, as the Chief Medical Officer and Director of the Division of Specialized and Hospital Services for the Satakunta Wellbeing Services County, as well as Chief Medical Officer at the Satakunta Hospital District and Turku University Hospital.
Terveystalo reports a successful third quarter.
Terveystalo raised its earnings guidance regarding adjusted operating profit. Regarding revenue, the guidance remained unchanged. The company now estimates the adjusted operating profit before amortization and impairment of intangible assets (EBITA) to be 12.0–12.5 percent of revenue.
Terveystalo previously estimated that full-year 2024 revenue would grow and that adjusted operating profit before amortization and impairment of intangible assets (EBITA) would be 11.5–12.5 percent of revenue.
In 2023, revenue was 1.3 billion euros and the EBITA margin was 9.8 percent.
CEO Ville Iho interviewed by @Roni_Peuranheimo regarding Q3! 
Analyst comments on Terveystalo’s Q3 result.
Inderes raises target price to EUR 10.80 (previous: €10.20), recommendation downgraded to REDUCE (previous: ACCUMULATE).
Nordea julkaisi päivitetyn Tervetystalo-analyysinsä. Suositus pysyy OSTA-tasolla, tavoitehinta nousee 11,80 euroon (edellinen: 11,00 €). 
Key downside risks: Increasing competition; availability and retention of key personnel; partnerships with insurance companies; and the outlook for occupational health and private healthcare services in a post-SOTE reform environment.
OP maintains Add and raises the target price from €10.80 to €11.20
Strong earnings performance continued in Q3, and the 12% EBITA target will be achieved a year ahead of schedule. Focus shifts next to growth, and the profitability turnaround in Sweden is underway.
Acceptable multiples are EV/EBIT 11x for 2025
Danske Bank published its updated view on Terveystalo. Recommendation BUY, target price €12.00.
Here is a fresh company report on Terveystalo from Roni.
Terveystalo’s share has been under pressure since the company’s Q3 report and, following the share price decline, we believe the valuation (2025e adj. P/E 11x) has returned to an attractive level. Upper respiratory tract infections have remained prevalent in recent weeks, which should support visit volumes for the remainder of the year, increasing the probability of a positive profit warning to some extent. However, more interesting for the company’s investment story than the Q4 development is hearing about the company’s new financial targets and strategic directions at the Capital Markets Day on December 4, 2024.
Terveystalo raises its profitability guidance for 2024.
Terveystalo raises its profitability guidance for 2024. Revenue guidance remains unchanged.
- The quarterly earnings development so far has been stronger than our forecasts due to strong demand and further improved operational efficiency. Our earnings improvement continues, and we anticipate the full-year adjusted operating profit before depreciation and impairment of intangible assets (EBITA) to be 12.5-13.1 percent of revenue, comments Ville Iho, CEO of Terveystalo.
New earnings guidance for 2024:
Terveystalo estimates full-year 2024 revenue to grow (2023: 1,286 million euros), and adjusted operating profit before depreciation and impairment of intangible assets (EBITA) to be 12.5-13.1 percent of revenue (2023: 9.8 percent).
Previous earnings guidance for 2024, published 25 October 2024:
Terveystalo estimated full-year 2024 revenue to grow (2023: 1,286 million euros), and adjusted operating profit before depreciation and impairment of intangible assets (EBITA) to be 12.0-12.5 percent of revenue (2023: 9.8 percent).
It’s rare for one’s investments to hit the mark just by noticing a change around them.
After the COVID era, people are clearly getting sick much more often.
At work, people are constantly suffering from the flu, and the phrase “I’ve never been this sick or this ill in my life” keeps repeating in people’s conversations.
Flu, aggressive cancers, and strange, unexplained symptoms, etc., all the time.
For this reason, I invested extra thousands into Terveystalo when the stock was close to 7 euros.
So what does that earnings warning say?
The estimates are based on the forecast for the third quarter of 2024 regarding inflation, consumer demand, and employment, as well as higher-than-usual morbidity.
Analyst’s comments regarding the positive profit warning.
