KUALA LUMPUR (Nov 24): KPJ Healthcare Bhd’s (KL:KPJ) earnings may remain under pressure in the coming quarters, as analysts warn that intensifying payor pressure — particularly from insurance operators — could further weigh on margins. 

The private hospital operator reported core earnings for the nine months ended Sept 30, 2025 (9MFY2025) that reached only 67% of the consensus full-year forecast with one quarter to go, prompting several research houses to revise their FY2025 expectations lower. 

“Going into 4QFY2025, we expect revenue to remain flattish q-o-q (quarter-on-quarter), as potentially lower inpatient volumes — following the more stringent insurance/takaful operators’ (ITO) coverage implemented since May 2025,” Hong Leong Investment Bank (HLIB) Research, the most bullish among analysts tracking the company, said. 

This however, could be mitigated by KPJ’s shift towards more complex, higher-value surgical procedures, which would lift the group’s average revenue per inpatient, the research house added. 

KPJ’s 3QFY2025 earnings came in a slightly lower due to softer-than-expected inpatient volumes and continued payor-driven constraints from tighter claim approvals by ITOs.

Consensus estimates now point to KPJ posting a net profit of RM345.75 million for FY2025, on RM4.19 billion revenue. This compares with the group’s FY2024 performance, when it delivered a profit after tax and minority interest (Patami) of RM353.8 million on RM3.9 billion in revenue.

The government’s plan to introduce Diagnosis-Related Group (DRG) payment rules — meant to regulate hospital reimbursements and control insurance costs — has been postponed to FY2027.

CGS International said payor pressure remains mild for now, as KPJ’s existing agreements with insurers should help ease future DRG negotiations. However, it noted that recent talks have already led to higher insurer discounts, tighter claim requirements, and reduced coverage for some inpatient stays, which have weighed on KPJ’s operating performance.

According to Kenanga Research, KPJ has not been removed from any insurance panels, but insurers are enforcing tighter admission approvals due to rising medical inflation. It warned that this could deter some patients from seeking treatment at private hospitals. 

“The challenge for private healthcare operators is the recurring pressure to negotiate pricing and discounts with insurance panels, while maintaining quality care at reasonable costs — a combination that could squeeze margins,” Kenanga added.

KPJ’s shares have risen nearly 12% year to date, supported by investor confidence in its dominant market position in Malaysia’s private healthcare sector, underpinned by structural drivers such as rising affluence and an ageing population. 

Bloomberg data shows analysts are divided, with eight ‘buy’ calls and nine ‘hold’ calls. The consensus 12-month target price stands at RM2.89, representing a 6.6% upside from its last traded price of RM2.71.

Beyond 2025, HLIB expects KPJ to benefit from the Malaysia Year of Medical Tourism 2026, which could provide an upside surprise to patient volumes. All six of KPJ’s gestation hospitals are now earnings before interest tax depreciation and amortisation positive, with three expected to turn profitable at the bottom line by end-CY2025 or CY2026 as they mature.

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