Hapvida loses almost BRL 12 billion after announcing a 56% drop in annual profit – 03/01/2023 – Market

Shares in health care company Hapvida plunged to nearly 37% at their worst on Wednesday, equivalent to a loss of 11.79 billion reais in market value, amid investor disappointment over the fourth quarter result. quarter of 2022 and concerns about the future.

The company reported the day before a drop of 56.1% in net profit adjusted year on year, to R$ 161.4 million. Without adjustments for amortization of trademarks and patents and customer portfolios, as well as related to long-term incentives to executives, there was a loss of R$ 316.7 million.

Executives were not able to calm the market in a conference call with analysts, in which they stated that Hapvida will accelerate the verticalization of its operations and reinforce price adjustments for its plans as a way to improve its profit margins, but that the recovery will be gradual.

At 2:28 pm, the shares fell 33.63%, to R$ 2.98, renewing historic lows and accounting for the worst performance of the Ibovespa, which retreated 1.21%. At the worst moment, the shares reached R$ 2.84 (-36.75%). The second biggest drop in the index was 3R Petroleum, down 13.9%.

Credit Suisse analysts cut the paper’s recommendation to “neutral” and reduced the target price from BRL 6.50 to BRL 4.40 after the balance sheet, assessing that the fourth quarter data added uncertainties about the persistence of pressures from frequency of claims and cash conversion of receivables.

“We continue to believe that the reversal of loss ratios may take a few quarters, as they depend on relatively high ticket readjustments to compensate claims pressured by inflation and utilization for two years”, they said in a report to clients.

Furthermore, added Mauricio Cepeda and Pedro Caravina, the quarter’s result brought uncertainties about the sustainable level of utilization, putting even more pressure on the recovery of claims. They also assess that financial expenses may continue to pressure earnings.

“So we don’t believe in a thesis value unlock for this year.”

The group’s cash loss ratio was 72.9% in the quarter, an improvement of 0.1 percentage points compared to the immediately previous quarter, but a decline of 8.1 points on an annual basis.

In the view of analysts at Citi, Hapvida’s numbers came in worse than feared, citing data on loss ratio (MLR) higher than expected by the US bank, as well as financial expenses “much higher” than expected.

“Not much to celebrate. It’s true that expectations were already low, but the numbers came in below our below-consensus estimates, which doesn’t bode well for visibility going forward and could lead to another round of revisions. down (in expectations).”