The healthcare sector showed promising growth prospects, driven by rising affluence and an ageing population, according to reports by Kenanga Investment Bank (Kenanga). Global healthcare expenditure is projected to grow at a CAGR of 3.5% to reach USD10 trillion by 2026.

This growth is anticipated to boost both domestic and international patient throughput while enhancing revenue intensity due to a higher volume of acute cases. The ramp-up of new beds across various markets is expected to improve operational efficiency and cost optimisation, with strong sales anticipated in pharmaceuticals and over-the-counter (OTC) drugs.

Kenanga maintains an OVERWEIGHT stance on the healthcare sector, with a top pick of IHH Healthcare Berhad (IHH) and a target price of RM7.00. The investment bank highlights IHH's expected revenue growth driven by increased patient throughput and higher revenue intensity. Similarly, KPJ Healthcare Berhad (KPJ) is rated MARKET PERFORM with a target price of RM1.95, benefiting from improved patient throughput and operational efficiencies.

IHH is set to benefit from a projected 12% to 16% growth in revenue per inpatient and 9% to 12% growth in inpatient throughput for FY24. The company plans to add over 4,000 beds in the next five years, supporting its expansion across Malaysia, India, Türkiye, and Europe. KPJ is also expected to see a 9% increase in patient throughput, with its new hospitals gradually reducing losses. However, the recent share price run-up has largely factored in these improvements.

In the health supplements and OTC drugs segment, the OTC pharmaceuticals market in Malaysia is expected to grow at a CAGR of 6% to USD715 million by 2027. Kenanga favours KOTRA Industries Berhad (KOTRA) and NOVA Wellness Group Berhad (NOVA) as they benefit from rising consumer health awareness and expanded distribution networks. KOTRA's integrated business model and NOVA's new plant are projected to drive growth in their respective segments.

However, PHARMA (UP; TP: RM0.34) faces challenges with its PN17 status, despite recent improvements in profitability.

Kenanga's analysis underscores the strong growth trajectory of the healthcare sector, highlighting key opportunities in both private hospital chains and the health supplements market.