PETALING JAYA: Healthcare service providers, especially those catering for domestic patients, are expected to see short-term margin compression but would still see higher and sustained inpatient volumes moving forward.
MBSB Research believes the ongoing fourth quarter of financial year 2025 (4Q25) earnings season to be a narrative of recovery and modernisation.
“This year will be the launchpad for high-acuity medical tourism and self-sufficient biopharmaceutical manufacturing and distribution for local healthcare providers,’’ MBSB Research said.
These are further supported by a rising ageing population and increasing demand for precise treatments and sustained support from government initiatives, incentives and concessions for both public and private healthcare sectors.
It will also be supported by ongoing digital and artificial intelligence or AI-technology adaptation for hospital administration and medical equipment.
“Nevertheless, we remain cautious on the downside risks that include medical cost inflation, drug policy shifts and pricing pressures from trade tariffs,’’ MBSB Research said.
Its focus for the healthcare sector is KPJ Healthcare Bhd
, for which it maintains a “neutral” call with a target price (TP) of RM2.65 a share and Pharmaniaga Bhd (“buy” TP: 32 sen).
Both companies are under review pending their earnings release scheduled for next week, it added.
KPJ is in an advantageous position to capture the overflow from local insurance and takaful patients seeking faster, high-quality and relatively affordable care outside of the usually congested public hospitals.
“In terms of the upcoming earnings, we do expect that the group’s newer hospitals would begin moving out of their gestation phase, which would support KPJ’s bottom-line in the quarters to come,’’ MBSB Research said.
It added that “we like Pharmaniaga for its defensive income from its logistics and distribution segment and the upcoming contribution from its biopharmaceutical division following the secured RM3mil in tenders for human insulin.
“We expect both companies’ 4Q25 earnings to be within or above expectations, on the back of a stable topline and higher volume for both sales of pharmaceutical products and inpatient treatments during 4QCY25,’’ MBSB Research added.
Global healthcare companies are expected to continue implementing strategies to curb future headwinds in financial year 2026 (FY26).
Labour shortages are expected to be stabilised but offset by medical supply inflation, which is forecasted to stay high throughout the year.
This may cause a slowdown for hospitals to return to pre-pandemic margins.
“As such, we believe that most healthcare service providers would consider rationalising assets by undertaking high-margin specialities instead of focusing on just general health,’’ it added.
For medical devices, the setback lies in China’s deep price cuts for diagnostics, which could impact first half of FY26 earnings before stabilising based on ongoing merger and acquisition activities between giants and smaller tech companies.
Expansion and integration of AI into the equipment, and increasing demand for lab tests and imaging.
For pharmaceuticals, the surging growth in revenues is expected to be supported by the unyielding demand for GLP-1 and oncology drugs.
However, unprecedented pricing pressures and competition among Big Pharma may pose risks to companies with more focus on internal cost management and non-US markets.
