PETALING JAYA: KPJ Healthcare Bhd
’s domestically-oriented business as well as higher return on equity and earnings before interest, tax, depreciation and amortisation (Ebitda) margins relative to IHH Healthcare Bhd, make the company a defensive refuge, says RHB Research.
The research house, which has maintained a “buy” call on the stock, sees untapped upside from the company’s centres of excellence (COEs) that provide specialist care, especially as these mature across its network of hospitals.
RHB Research widened the valuation premium compared to IHH due to KPJ’s stronger domestic resilience amid geopolitical-driven inflationary pressures.
It maintained the stock as the top pick among domestic listed hospital operators.
RHB Research lifted KPJ’s core profit after tax and minority interest (Patami) for the financial year ending Dec 31, 2026 (FY26) by 8% while raising FY27 and FY28 Patami by 7% and 4%, respectively, to reflect higher inpatient revenue intensity growth assumptions of 4.5% from 1.5% as well as a lower effective tax rate partially offset by higher depreciation.
“This results in a higher discounted cash flow-derived target price of RM3.79, which implies 18.6 times 2026 enterprise value/Ebitda (from 17.5 times), at plus 3.5 standard deviation from its five-year historical average of 12.1 times,” it said.
KPJ’s relatively smaller exposure to medical tourism – which contributes 6% to revenue compared to peers’ 14% to 15% – makes it a pure play defensive refuge, while any increase in international patient flows would provide a larger incremental boost to its smaller base.
In addition, the upcoming rollout of the medical and health insurance/takaful base plan initiative will benefit KPJ’s secondary care hospitals, as it can absorb volume from price-sensitive middle-40 income band segment while limiting exposure to potential insurance-driven downtrading.
Moreover, KPJ’s COE uplift plans provide high visibility for revenue-intensity growth, ensuring it moves towards high complexity, high-margin care.
In FY25, KPJ’s net profit increased to RM365.92mil from RM353.81mil a year earlier.
Revenue rose to RM4.25bil against RM3.89bil a year earlier, largely contributed by a higher number of patient visits.
KPJ said in a previous filing with Bursa Malaysia that its operational beds increased 4% year-on-year as capacity expansion progressed.
Surgical cases, meanwhile, rose 11% and average revenue per inpatient increased 7%, reflecting continued growth in patient activity across the network.
Looking ahead, KPJ is targeting a 56% increase in its total bed capacity in four years.
By 2030, the largest domestic private healthcare group by capacity targets the addition of 2,200 new beds to its current count of 3,934 beds.
The targeted growth is a 9.3% five-year compounded annual growth rate across nine hospitals.
In an earlier note, UOB Kay Hian Research said the expansion will prioritise high-occupancy facilities and is aligned with the group’s regional hub-and-spoke model.
This would enable more efficient scaling of capacity and better utilisation of resources across its network, the research house added.
KPJ’s five-year strategic plan from 2026 to 2030 will mark its shift from a traditional network of hospitals to a health system focused on clinical excellence, research and education.
