IHH: Core Earnings Exceed Expectations on Robust Demand and Cost Control

A leading private healthcare provider reported a robust core net profit of RM595 million for the third quarter of fiscal year 2025 (3QFY25), marking a 5.7% year-on-year increase. This performance significantly surpassed both the internal expectations (71%) and broader market consensus (84%), driven by strong operational momentum across key markets and stringent cost management. While the headline net profit experienced a 12.5% year-on-year decline to RM462 million, primarily due to elevated operating expenses, the underlying operational strength points to a positive trajectory. Investment bank TA Securities has reiterated a BUY recommendation with a target price of RM8.79.

Performance Overview

The company’s revenue for 3QFY25 grew by 16.4% year-on-year to RM6.6 billion, fueled by sustained demand for quality healthcare services and a higher intensity case mix. Geographically, the Group observed a notable rise in inpatient admissions across its operations in Malaysia, India, and Turkiye. Conversely, Singapore experienced a 10% year-on-year decline in inpatient admissions. The Group’s overall bed occupancy rate (BOR) saw a slight easing to 68% in 3QFY25, down from 73% in 3QFY24.

Despite the softer utilization in some areas, earnings before interest, taxes, depreciation, and amortization (EBITDA), excluding the impact of MFRS 129, improved by 10% year-on-year to RM1.5 billion. This was largely attributable to stronger contributions from Malaysia, India, and Turkiye, which effectively mitigated cost pressures encountered in Singapore and Greater China, where EBITDA saw declines of 6% year-on-year in both regions. The Group demonstrated sustained cost discipline, resulting in an expansion of the EBITDA margin (excluding MFRS 129) by 3.1 percentage points year-on-year, reaching 27% in 3QFY25.

Future Outlook

The company remains committed to its multi-year transformation agenda, aiming to cultivate a more capital-efficient network across its primary markets. Recent strategic initiatives underscore this commitment, including the acquisition of Shrimann Superspecialty Hospital in India and the enhanced operational synergy between Fortis Healthcare and Gleneagles India through a new maintenance services agreement. In Singapore, the full reopening of beds at Mount Elizabeth Orchard Hospital in 3QFY25, following a three-year upgrading program, is anticipated to bolster revenue as utilization rates increase.

Despite prevailing headwinds such as persistent payor pressure and medical inflation, the resilient demand for healthcare services, coupled with the increasing contributions from medical tourism, positions the Group favorably for sustained growth. Analysts maintain earnings forecasts for FY25F-27F, affirming a positive outlook on the company’s strategic direction and operational resilience.