PETALING JAYA: Shareholders of Sunway Healthcare Holdings Bhd can look forward to stronger quarters ahead, following a seasonally softer first-quarter earnings.
The earnings momentum will be supported by favourable operating leverage at Sunway Medical Centre (SMC) Penang, stated Hong Leong Investment Bank (HLIB) Research.
In addition, positive earnings before interest, tax, depreciation and amortisation (Ebitda) contributions from SMC Damansara and SMC Ipoh will provide an additional boost.
The research house noted that Sunway Healthcare’s core net profit fell by 60% quarter-on-quarter (q-o-q) to RM45.7mil in the first quarter ended March 31, 2026 (1Q26).
A weaker revenue, mainly due to festive disruptions from Chinese New Year, Ramadan and Hari Raya, as well as unfavourable operating leverage, higher operating costs and a higher effective tax rate led to the lower core net profit.
But the 1Q26 core net profit remains within the full-year estimates of consensus and HLIB Research at 15%. “In 2026, we project revenue to grow 19.2% year-on-year (y-o-y), supported by stronger contributions across all operating hospitals.
“Correspondingly, we expect core net profit to increase at a marginally stronger pace of 20.5% y-o-y, underpinned by an improvement in Ebitda margin from 23.9% to 24.7%.”
HLIB Research has maintained its “buy” call on Sunway Healthcare, but raised the target price to RM2.05 per share from RM1.63 previously.
“We continue to see further upside potential in Sunway Healthcare’s share price, supported by the possibility of incremental foreign fund inflows, given its relatively low foreign shareholding versus IHH Healthcare.”
Meanwhile, Kenanga Research continues to have a “market perform” call on the stock, with a target price of RM1.75, lower than the current price of RM1.81 at last look.
“Any potential upgrade in our call hinges on stronger-than- expected performance from new hospitals,” it said in a note.
Commenting on the 1Q26 results, Kenanga Research said it “barely met expectations”.
Going forward, the research house expects Sunway Healthcare to derive cost synergies from its size, scale and network that will help mitigate adverse margin impact from gestation of its ongoing expansion.
In a separate note, CIMB Research said Sunway Healthcare’s growth outlook remained intact, although the stock’s valuation is still intact.
“Nonetheless, we believe Sunway Healthcare’s current valuation has largely factored in its future earnings upside following an impressive 27% gain since its initial public offering debut on March 18, 2026.
“Its prevailing enterprise value/Ebitda multiple of 27 times appears fair, as it represents a 6% premium to India-listed peers with comparable three-year earnings compounded annual growth rate outlooks.” It has a “hold” call on Sunway Healthcare with a target price of RM1.88 per share.
