KPJ Healthcare Bhd’s (KPJ) quarter two financial year 2025 (2QFY25) normalised earnings came in below MBSB Research’s and consensus’ expectations at 33% and 36% respectively.
“Despite the growth in revenue and earnings, we revised our target price from RM3.00 to RM2.65. We downgrade to neutral from buy for KPJ,” said MBSB.
Revenue in the first half of financial year 2025 (1HFY25) increased to RM1.99 bil. This was largely contributed by the increase in patients’ visits, as well as increased bed capacity in the current quarter compared to the corresponding quarter.
Meanwhile, 1HFY25 earnings before interest, tax, depreciation and amortisation, added to RM460.6mil.
Likewise, core earnings for 2QFY25 gained +10% year-on-year (yoy) to RM85.5 mil, and 1HFY25 added +11%yoy to RM142.7 mil.
KPJ’s prospect remains bolstered by favorable economic environment and significant regulatory development. The robust economic growth is expected to drive higher household spending and demand for private healthcare services.
Furthermore, the Ministry of Health’s (MoH) decision to defer the implementation of the Diagnosis Related Group (DRG) system until 2027 is expected to provide a welcoming period of clarity and stability for the group, allowing for a smoother transition and reducing near-term operational uncertainty.
“Nevertheless, we remain cautiously optimistic that its ongoing internal strategies will position it to capitalise on the market and ensure sustainable growth,” said MBSB.
Considering that 1HFY25 earnings came in below expectations, we revised FY25-27 downwards by -22%/-19%/-14% respectively.
The downgrade is taking into consideration of the cessation of KPJ’s international operations and its profitability, gestation periods of new hospitals and increased expenses in tandem with increasing patient admission. We maintain this revision pending further guidance from the group. —Aug 29, 2025
Main image: Berita Harian
