IHH: Healthcare Group Delivers Steady Core Profit on Revenue Growth, Outlook Cautiously Optimistic

A leading regional healthcare provider reported a core net profit of RM844 million for the financial year ending 2025 (IHFY25), largely flat compared to RM840 million in the previous year. This performance was in line with the investment bank’s expectations, representing 46.0% of its full-year forecasts, although it fell short of consensus estimates. Despite the flat core profit, the group’s revenue expanded by 4.5% year-on-year to RM12.6 billion, driven by sustained improvements in patient volumes and revenue intensity across most key markets. The group also announced an increased first interim dividend of 5.0 sen per share for IHFY25, up from 4.5 sen in IHFY24.

Performance Review

The flat core net profit masked varied performances across the group’s key operating regions. In Malaysia, EBITDA saw a robust 14% increase to RM562 million, primarily propelled by the acquisition of Island Hospital. This strategic addition significantly boosted foreign medical tourism, with contributions more than doubling and foreign patients now comprising 13% of Malaysia’s revenue. Without Island Hospital, volume and case intensity would have remained largely flat.

Conversely, Singapore’s EBITDA experienced an 11% decline to RM859 million, mainly due to ongoing renovation works at Mount Elizabeth Orchard, which concluded at the end of June 2025. In Türkiye and Europe, revenue grew 14% to RM4 billion, fueled by higher service intensity and patient volume, but EBITDA growth was limited to a mere 1% due to start-up costs associated with newly opened Acibadem Kartal and Vitosha hospitals. India demonstrated solid performance, with EBITDA growing 3% to RM193 million, driven by operational improvements at Fortis.

Outlook and Strategy

Looking ahead, the group remains cautiously optimistic about its prospects. In Malaysia, patient volumes are expected to remain robust in the second half of 2025 (2H25), and management is confident that Malaysia’s EBITDA margin will be sustained at 25%, supported by ongoing procurement rationalisation. The group is also shifting towards a daycare model in Malaysia, following successful implementations in Hong Kong and Singapore. This strategy led to a 20% growth in Malaysia’s daycare revenue and an 18% increase in volume during 2Q25. Consequently, the previously budgeted RM700 million expansion capital expenditure will be scaled down, though the group remains committed to adding 820 beds by 2028, focusing expansion on hospitals with high occupancy rates.

Singapore’s EBITDA margins are anticipated to improve with the phased reopening of Mount Elizabeth Hospital, with full utilisation projected by 2Q26. Meanwhile, in India, the focus is on enhancing operational efficiency through the integration of Fortis and Gleneagles operations. Overall, the group’s growth trajectory is intact, with management reaffirming its EBITDA margin target of 22-24%.

Analyst View

TA Securities maintains its “Hold” recommendation on the stock, with a target price (TP) of RM7.48 per share. This target price implies a 10.1% upside from the last traded price of RM6.79. The valuation is based on a Sum-of-the-Parts (SOTP) approach.