IHH: Healthcare Operator Exceeds Earnings Expectations on Robust Efficiencies, Analyst Maintains ‘BUY’

A leading healthcare operator is projected to have delivered a strong third-quarter (3Q25) performance, with its core net profit broadly meeting analyst and consensus expectations. The positive outlook is primarily attributed to significant cost efficiencies and improved operating metrics, particularly in key markets.

Performance Review

For 3Q25, the company’s core profit is estimated at approximately MYR521 million, reflecting a modest 1.4% year-on-year decline but a robust 24% quarter-on-quarter increase. This brings the nine-month 2025 (9M25) core net profit to MYR1.36 billion, largely in line with 73% of the analyst’s full-year forecast and 71% of consensus. While constant-currency revenue and EBITDA growth maintained strong momentum at 17% and 11% year-on-year respectively for 9M25, reported growth was moderated to 9% and 2.8% due to the appreciation of the Malaysian Ringgit against key operating currencies. The 3Q25 EBITDA margin is expected to improve by 0.2 percentage points quarter-on-quarter, reaching 21.7%.

Operational Strengths and Challenges

This margin expansion is largely driven by enhanced EBITDA contributions from Singapore, following the successful reopening of Mount Elizabeth Hospital (Orchard), and from its Acibadem hospitals in Turkiye, which benefited from stronger operating metrics at newly opened facilities like Kartal and Vitosha hospitals. The analyst continues to favor the company for its strong execution, reputable regional footprint, and focus on affluent clientele, factors that are expected to bolster earnings resilience.

However, the company faces potential headwinds including softer patient volumes stemming from weaker-than-expected economic growth, the risk of overpaying for acquisitions, aggressive cost inflation across its operating markets hindering the ability to pass through cost increases, and currency volatility leading to translation losses.

Future Outlook and Valuation

Looking ahead, the investment bank has revised its 2025F-2027F earnings estimates upward by 13%, 5%, and 14% respectively. These revisions incorporate updated operating assumptions for Acibadem and India, along with adjustments for foreign exchange and margins. Consequently, the report’s SOP-derived target price has been increased to MYR9.15, supported by a higher ascribed 15x FY26F EV/EBITDA multiple for non-listed hospital operations. Near-term catalysts include positive revisions in India’s Central Government Health Scheme rates and the removal of regulatory overhang, which is expected to re-open the company’s India growth narrative. Given these factors, the analyst maintains a “BUY” recommendation.