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MD Medical Group (MDMG) has reported its 1Q20 trading update, which we view as modest, and believe has implications for quarterly profitability. While we summarise the highlights below, we note that the 1Q20 trends are not particularly important for 2Q20, as the anchor Lapino hospital has been turned to an infection clinic. Furthermore, IVF treatments have been stopped across almost all Russia; the number of outpatient visits is down and the company is bearing the additional cost of higher salaries for medical personnel who are treating COVID-19 patients and steeper prices for sanitizers and materials. We see the roles of Lapino and PMC in the company’s overall business as growing. However, their strong performance in April, and most likely in May-June (at least), cannot compensate for the full closure of its IVF business (around 25% of sales in 2019) and material drop in the number of inpatients and outpatients (almost 20% of revenues in 2019). We believe that the 2Q20 revenues could see a 20-25% y/y correction and thus represent downside risks to our annual forecasts.
125 RUSSIA Country Report June 2020 www.intellinews.com
