Hong Leong Investment Bank (HLIB) Research has reiterated its BUY call on KPJ Healthcare Bhd with a target price of RM3.79, citing stronger earnings prospects, structural healthcare demand and potential margin improvements despite lingering concerns over the group’s recent leadership transition.
HLIB said KPJ’s fundamental outlook remained constructive, supported by Malaysia’s ageing population, rising prevalence of chronic diseases, growing preference for private healthcare and a persistent imbalance between hospital bed supply and demand.
The research house expects these structural trends to underpin stronger revenue and earnings for the private healthcare group.
KPJ’s upcoming analyst meeting on Sept 8 could also serve as a near-term re-rating catalyst, HLIB said, particularly if management provides greater clarity on its strategic priorities, leadership transition and execution roadmap.
Investor confidence was affected by the unexpected departure of former president and managing director Chin Keat Chyuan, who had led KPJ’s growth, asset optimisation and transformation agenda since 2023.
HLIB said his departure raised concerns over strategic continuity, adding that a reassuring management update could help reduce uncertainty and restore investor confidence.
On costs, HLIB expects the full-year impact of insurance and takaful-related discounts in 2026, compared with eight months of impact in 2025, to be partly mitigated by KPJ’s ongoing cost-optimisation measures.
These include the group’s internal diagnosis-related group (DRG) system, which forms part of efforts to improve cost and operational efficiency.
HLIB also sees potential for stronger margins as KPJ handles increasingly complex medical cases following the rollout of multiple Centres of Excellence (CoEs).
The successful expansion of these specialised centres presents potential upside for positive surprises in earnings before interest, taxes, depreciation and amortisation (EBITDA) margins, it said.
HLIB said it continues to favour KPJ for its strategic positioning to benefit from Malaysia’s longer-term healthcare demand, alongside its cost-optimisation initiatives and expansion into higher-complexity treatments.
From a technical perspective, HLIB noted that KPJ shares had previously surged 50.9% from their 52-week low of RM2.34 to RM3.53, before undergoing a sharp correction following Chin’s abrupt resignation.
The stock subsequently fell 23.5% to RM2.70, as leadership uncertainty weighed on sentiment.
HLIB said KPJ is now building a base around RM2.63, its year-to-date low, with bargain hunting emerging following the steep pullback and trading volume showing signs of improvement.
A decisive breakout above RM2.84, corresponding to the 10-day moving average, and RM2.94 could potentially drive the stock towards the next technical levels at RM3.08 and RM3.25, according to the research house.
Key support levels are seen at RM2.63, RM2.60 and RM2.52.
HLIB maintained that KPJ’s longer-term investment proposition remains intact despite the recent leadership uncertainty, reiterating its BUY recommendation and RM3.79 target price.
