Is KPJ Healthcare Berhad (KLSE:KPJ) a High-Growth Healthcare Stock Worth Buying in 2026?

The Malaysian healthcare sector has long been a magnet for investors seeking resilience amid macroeconomic volatility, and KPJ Healthcare Berhad (KLSE:KPJ) has emerged as a standout player. With a focus on earnings momentum, valuation metrics, and dividend sustainability, this analysis evaluates whether KPJ remains a compelling long-term investment ahead of 2026.

Earnings Momentum: Outpacing the Industry

KPJ Healthcare has demonstrated robust earnings growth, outperforming both its peers and the broader healthcare industry. Over the past year, the company's earnings have grown at an average annual rate of 31.2%, significantly exceeding the industry's 8.9%. This momentum is underpinned by a 13.6% annual revenue growth rate and a trailing twelve months (TTM) net profit margin of 8.906%. For the third quarter of 2025, KPJ exceeded revenue expectations, though its earnings per share (EPS) fell marginally short, reflecting operational headwinds that appear manageable.

Looking ahead, analysts project EPS growth of 30.7% in 2026, driven by expanding outpatient services and strategic acquisitions. Such growth trajectories suggest KPJ's ability to capitalize on Malaysia's aging population and rising healthcare demand.

Valuation: A Double-Edged Sword

KPJ's valuation metrics present a mixed picture. The stock currently trades at a P/E ratio of 34.5x, well above the Asian healthcare industry average of 19x. While this premium reflects investor confidence in KPJ's growth prospects, intrinsic value analysis suggests the stock is 19% overvalued, with a calculated intrinsic value of MYR 2.24 per share versus the current price of MYR 2.75.

However, the P/E ratio is below its 5-year average of 42.37x and is forecasted to decline to 31.4x in 2026. Similarly, the price-to-book (P/B) ratio of 4.29x is expected to dip to 4.05x by 2026. These trends indicate that while KPJ's valuation is elevated, it may normalize as earnings growth justifies the premium.

Dividend Sustainability: A Growing, But Manageable, Payout

KPJ has maintained a commendable dividend growth trajectory, with a 30% compound annual growth rate in dividends over the past three years. The latest dividend hike of 7% to MYR 0.0123 per share, announced on December 23, 2025, reflects a forward yield of 1.6%. Crucially, the payout ratio stands at 51%, a level analysts deem sustainable given KPJ's earnings resilience.

Looking ahead, projected EPS growth of 30.7% could reduce the payout ratio to 44% by 2026, further strengthening dividend safety. This aligns with the company's historical focus on balancing shareholder returns with reinvestment in growth initiatives.

Risks and Considerations

While KPJ's fundamentals are strong, investors must weigh several risks. The stock's current valuation premium implies heightened sensitivity to earnings shortfalls or macroeconomic shocks. Additionally, while the CEO's compensation of MYR 3.1 million is below the median for comparable firms-a positive for governance- executive turnover or strategic missteps could disrupt growth.

Conclusion: A Buy for Growth-Oriented Investors

KPJ Healthcare Berhad's combination of high earnings growth, improving valuation metrics, and sustainable dividends positions it as a compelling long-term play in the healthcare sector. While the stock's current price reflects elevated expectations, its projected earnings growth and disciplined payout ratio suggest the fundamentals can justify the premium. For investors with a 3–5 year horizon and a tolerance for moderate volatility, KPJ remains a high-conviction buy ahead of 2026.