BIMB Securities Research said it expects the impact on demand for private-hospital care to remain minimal in the near term.
PETALING JAYA: Private-hospital operators in Malaysia are expected to deliver double-digit earnings growth this year, says BIMB Securities Research.
The growth momentum will be sustained on the back of consistent increases in inpatient and outpatient visits, with the recovery in admissions continuing this year.
This is amid strong demand for private healthcare in Malaysia.
In the first nine months of 2024, listed hospital players IHH Healthcare Bhd
and KPJ Healthcare Bhd posted double-digit growth in revenue and earnings.
“Organic capacity expansion is also expected to enhance revenue from health tourism.
“While contributing less than 15% of revenues for KPJ and IHH, it is poised for growth through healthcare digitalisation, modernisation of facilities, rising chronic disease prevalence and increased healthcare spending, with Malaysians now spending an average of about RM2,022 per person a year on healthcare, up 17% from 2020 levels.”
Additionally, BIMB Securities Research said rising patient volumes will also boost pharmaceutical demand, particularly for medications to treat chronic and specialised conditions.
The research house noted that biopharma players like Pharmaniaga Bhd are making notable progress in the field, such as the development of Wosulin, a recombinant human insulin.
BIMB Securities Research maintained its “overweight” rating on the sector.
The research house said this was supported by the organic capacity expansion among private-hospital operators, growing demand for elective surgeries, improved adoption of healthcare digitalisation, increased revenue from health tourism and rising demand driven by an ageing population.
It has a “buy” call on IHH with a target price of RM8.60 per share, driven by expectations of strong performance from increased hospital activity.
The research house has a “hold” call and a target price of RM2.52 for KPJ as it believes upside potential is limited since the market had likely priced in the positive expectations for the company.
Commenting on inflationary pressures, BIMB Securities Research said it expects the impact on demand for private-hospital care to remain minimal in the near term as healthcare providers would pass on the costs to consumers.
“Given the inelastic nature of healthcare demand among middle and high-income groups, demand for private-hospital care is expected to remain robust.
In Malaysia, the health consumer price index had been experiencing a steady upward trend, reflecting rising costs in medical services, pharmaceutical products and hospital care.
The increases were driven by factors such as the adoption of advanced medical technologies, an ageing population and growing demand for quality healthcare.
While this aligned with global patterns, it also raised concerns about affordability of private healthcare.
BIMB Securities Research said, based on its observations, inflation had remained stable at below 2% over the past five months in medical products, appliances and equipment component of the index.
However, the health-services component has seen a consistent rise of around 4% since mid-2024, likely driven by increasing demand.
Health services inflation has averaged 0.6% annually since 2017.
