KPJ: Healthcare Sector Demonstrates Resilience and Strategic Adaptation Amid Payer Pressures

The healthcare sector in Malaysia broadly reported results in line with expectations for 3Q25, successfully navigating persistent payer pressure and a structural shift towards day-care models. While domestic inpatient admissions saw tempered growth, operators leveraged increased revenue intensity, operational efficiencies, and strategic cost management to maintain profitability and a positive outlook.

Performance Review: KPJ Healthcare

KPJ Healthcare’s 3Q25 core net profit after tax and minority interests (PATAMI) of MYR91 million, though slightly below the forecast due to a higher-than-expected tax rate and minority interest, contributed to 9M25 figures largely meeting full-year estimates. Revenue intensity continued its upward trend, primarily driven by higher-value cases, efficiency gains, and a notable pick-up in medical tourism. EBITDA margins remained stable at 23.1%, supported by ongoing cost rationalisation efforts. Despite facing softer domestic inpatient admissions, KPJ continued to be favored for its superior margins, return on equity, and a growing contribution from maturing hospitals. The management expressed optimism for sustained uplift in revenue intensity and selective bed expansions at high-occupancy hospitals, alongside holistic cost management.

Performance Review: IHH Healthcare

IHH Healthcare’s 9M25 core earnings came in slightly below expectations due to higher-than-anticipated effective tax rates and minority interests. However, core pre-tax profit aligned with estimates, bolstered by robust operational fundamentals leading to an expansion in EBITDA. The group’s hospital and healthcare revenue surged, reflecting sustained demand for quality services, a higher-acuity patient mix, price adjustments to offset inflation, and strategic consolidations of Island Hospital and Bayindir Healthcare Group. Group EBITDA margin improved to 23.3%, aided by effective containment of payer pressure and cost inflation, alongside better operating leverage from newly opened facilities. Domestic inpatient growth for IHH also saw an acceleration in 3Q25, with strong organic momentum in medical tourism and positive contributions from its international operations.

Performance Review: Duopharma Biotech

Duopharma Biotech delivered strong 3Q25 core net profit of MYR26.1 million, bringing 9M25 figures largely in line with full-year expectations, anticipating a seasonally slower fourth quarter. Revenue growth was robust, propelled by strong sales to the public sector under an expanded Approved Products Purchase List award. Significantly, gross profit margins expanded to 40.8%, benefiting from the delayed impact of easing Active Pharmaceutical Ingredient (API) prices and a softer US Dollar. The company’s solid earnings visibility and resilient pharmaceutical demand are expected to drive margin tailwinds into 2026, supported by peak demand in the APPL tender and de-bottlenecking initiatives.

Future Outlook and Strategic Direction

The sector demonstrates a clear strategic pivot towards day-care models, which, while impacting inpatient volumes, are expected to underpin longer-term EBITDA margin expansion due to greater efficiency and lower overheads. All key players are actively sharpening cost controls, scaling up centralised procurement, and pursuing higher-acuity or surgical cases to address capacity bottlenecks while remaining payer-friendly. Analysts generally maintain a positive outlook, emphasizing the industry’s ability to adapt to market dynamics through operational efficiencies and strategic expansions. The focus remains on sustainable growth drivers and mitigating ongoing challenges, with continued investments in high-occupancy hospitals and new care models.