Fig. 1: Indonesia healthcare market size at IDR652tn in 2024 – recording an 8% CAGR

Fig. 2: Supply chain breakdown of healthcare spending – medicines contribute c.27% of healthcare supply chain

From a supply chain perspective, healthcare spending is well diversified, with public and private hospitals accounting for the largest share at 27% and 34%, respectively, in 2024 or about IDR389tn combined. Assuming 40% of hospital revenue comes from medicines, this brings the pharmaceutical medicines sector to about IDR178tn (USD11bn).

Downstream segments such as medical doctors, self treatment, immunization, medicines, and supplements collectively represented a meaningful IDR161tn in 2024, while other healthcare-related services contributed IDR102tn. The breadth of spending across multiple touchpoints highlights the depth of the healthcare ecosystem and reinforces the strategic importance of distributors and logistics players that sit at the center of product flow across hospitals, pharmacies, and consumer channels.

The healthcare sector is one of the most defensive sectors due to its high pricing power, in our view. Indeed, for Indonesia specifically, the healthcare sector has grown steadily over the past few decades – including the Covid period – growing at an average of 1.2x of national GDP growth to 2024.

Fig. 3: Indonesia’s healthcare sector has been growing at a faster pace vs nominal GDP by about 1.2x…

Healthcare spending has consistently outpaced nominal GDP growth over the past decade. From 2010 to 2024, healthcare expanded at a 10.8% CAGR vs. GDP at 8.7%, implying a structural increase in healthcare intensity within the economy. The divergence became more visible post-2020, when healthcare spending rebounded faster and more strongly than GDP, reinforcing its defensive and non-discretionary nature. This confirms healthcare as a structural grower rather than a pure cyclical play, in our view.

Fig. 4: … But it still has a very long way to go – Indonesia spending per capita on healthcare is one of the lowest globally

Despite this strong growth, Indonesia’s healthcare spending per capita remains structurally low in a regional and global context. In 2022, Indonesia spent only USD390 per capita, far below the world average of USD1,725 and well behind regional peers such as Malaysia at USD1,281 and Thailand at USD1,107. Even Vietnam and the Philippines spend meaningfully more per capita. We believe this gap highlights significant long-term headroom for volume growth as income levels rise and access to healthcare improves.

Fig. 5: Strong correlation – GDP/capita and healthcare spending per capita

Fig. 5 shows a strong positive relationship between GDP per capita and healthcare spending per capita across countries, with an R² of 0.89, indicating that income levels are the primary driver of healthcare consumption globally. Indonesia sits well below the regression line, implying healthcare spending per capita is meaningfully underpenetrated relative to its income level. As GDP per capita continues to rise, we expect healthcare spending will structurally catch up toward the global trend, supporting a multi-year expansion in healthcare demand. This reinforces our view that healthcare growth in Indonesia has a long runway, driven by rising affordability rather than cyclical factors.

Fig. 6: Indonesia household spending on healthcare is not growing and one of the lowest globally – as a % of GDP

The underpenetration is also evident in household healthcare spending as a percentage of the GDP. Indonesia currently stands at only 2.7%, the lowest among peers and materially below the SEA average excluding Indonesia at 4.4%, and far below the global average of 9.9%. While peers have seen healthcare spending steadily trend up over the past two decades, Indonesia remains at an early stage of the curve. Combined with faster-than-GDP healthcare growth, this suggests a long runway for structural expansion driven by demographics, rising affordability, and gradual system deepening.

Fig. 7: Market size of pharmaceutical industry in ASEAN countries – Indonesia is the biggest with strong growth

Indonesia stands out as the largest and fastest-growing pharmaceutical market in the region. Market size expanded from about USD10bn in FY20 to USD16bn in FY24, implying a 13% CAGR, well above regional peers such as Vietnam at 7.3% and Singapore at 6.9%, while Thailand lagged at just 1.8%. In absolute terms, Indonesia is now meaningfully larger than Thailand and Vietnam, reflecting a combination of population scale, rising healthcare access, and increasing pharmaceutical consumption. The strong growth differential underscores Indonesia’s position as the key volume and growth driver in Southeast Asia’s pharmaceutical landscape, reinforcing the structural opportunity for distributors with nationwide reach.

On logistics

Logistics is inherently a “sticky” business due to its multi-layer and deeply embedded operating structure. Once a logistics provider is integrated into a customer’s supply chain, switching costs become high, not only financially but operationally.

This is especially true for end-to-end logistics that span warehousing, inventory management, cold chain, last-mile delivery, IT systems, and regulatory compliance. Any disruption risks service failure, revenue loss, or reputational damage for the client, making reliability and continuity far more important than marginal cost savings. As a result, logistics contracts tend to be long term, volume-based, and resilient across cycles, supporting stable cash flows and predictable earnings.

This is even more pronounced in pharmaceutical logistics, where safety, compliance, and traceability are non-negotiable. Pharma logistics requires strict temperature control, validated storage and transportation processes, batch level traceability, and adherence to Good Distribution Practice standards. Providers must invest heavily in specialized infrastructure, trained personnel, audit readiness, and IT systems to meet regulatory and customer requirements.

Once certified and trusted, pharma companies are highly reluctant to switch partners given the risk of product damage, regulatory breaches, or supply disruption. This creates a high barrier to entry and reinforces long-term partnerships, positioning pharmaceutical logistics as one of the most stable and defensible segments within the broader logistics ecosystem, in our view.

Company profile & financial analysis

MDLA is one of Indonesia’s largest healthcare distribution players, with a nationwide network that spans pharmaceuticals, medical devices, and healthcare-related products. Backed by Dexa Group (unlisted), MDLA has built deep relationships across hospitals, pharmacies, clinics, and principals, supported by a dense warehousing and logistics footprint across Indonesia.

MDLA’s business model involves purchasing inventory from principals (Pfizer [PFE US, Not rated], Novo Nordisk [NVO US, Not rated], etc.) and selling that inventory to pharmacies, hospitals and other buyers. The prices of these goods are set by the principal so the distributor takes a fee for their distribution. This ‘fee’ is in the range of ~10% at the gross margin level.

Beyond traditional distribution, MDLA is gradually repositioning itself toward higher value healthcare solutions. The company is expanding into consumable medical devices, medical solutions, and value-added services, leveraging its existing supply chain and customer access to deepen wallet share. This strategic shift improves margin quality and strengthens business stickiness, as customers increasingly rely on MDLA not just as a distributor but as an integrated healthcare solutions partner.

Fig. 9: MDLA’s company structure

MDLA is controlled by its founding shareholders, with Dra. Hetty Soetikno and Ferry Abidin Soetikno holding effective controlling stakes through direct ownerships and PT Ekon Prima, while the public owns 25% following the IPO. This shareholder structure ensures strong alignment between management and long-term value creation. Operationally, MDLA sits at the center of a diversified healthcare ecosystem, with majority ownership across key subsidiaries spanning pharmaceutical distribution, medical devices, industrial and medical gas supply, and healthcare services. The group structure allows MDLA to integrate distribution, logistics, and value-added healthcare solutions under one platform, reinforcing scale advantages, cross-selling opportunities, and business “stickiness” across the healthcare value chain.

MDLA IJ undertook its IPO primarily to strengthen its capital base and accelerate the scaling of its integrated healthcare distribution ecosystem, leveraging strong structural demand growth in Indonesia’s underpenetrated healthcare market. The company raised approximately IDR660bn from the IPO, with the bulk of the proceeds earmarked for reinforcing its core subsidiaries: around 86% was allocated to PT Anugrah Argon Medica (AAM) through a mix of intercompany loans and equity injection to support working capital and distribution expansion including warehouse acquisition, roughly 10% was injected into PT Deca Metric Medica (DMM) to scale its medical devices platform, while the remainder was directed to digital health and pharmacy network expansion (including GoApotik) to deepen last-mile reach and omnichannel capabilities.

Segment overview:

Fig. 10: Revenue breakdown and revenue share to MDLA IJ

MDLA’s revenue base continues to scale steadily, with total revenue rising from about IDR12tn in 2021 to IDR17tn by 2027F (our estimate), driven primarily by pharmaceutical products. Pharma remains the core growth engine, expanding from IDR8.4tn to IDR12.8tn over the same period and delivering a strong forecast CAGR at 8.3% for 2024-2027F. In contrast, we expect revenue from health products to decline at a -9.9% CAGR as the segment normalizes post-pandemic, while medical devices grow at a healthier 6.6% CAGR off a smaller base. Overall, we project total revenue to record a steady 5.1% CAGR, reflecting MDLA’s defensive exposure to pharmaceuticals and essential healthcare demand.

Fig. 11: Number of principals

We believe the stability of MDLA’s revenue is underpinned by a diversified and long-standing principal base. MDLA works with 18 principals in total, with a meaningful portion of relationships extending beyond 5, 10, and even 20 years, particularly in pharmaceuticals. These long-duration partnerships reflect trust, operational integration, and high switching costs, especially in regulated healthcare distribution. The depth and longevity of principal relationships reduce concentration risk, support recurring volumes, and reinforce MDLA’s position as a trusted distribution partner across pharmaceuticals, consumer health, and medical devices, in our view.

Pharma distribution business

The healthcare distribution industry purchases products from principals, stores them in warehouses and sells them to hospitals, clinics and pharmacies. They take a fee for these services.

Fig. 12: Pharma business – revenue growth and margins

MDLA’s pharmaceutical distribution business remains the core earnings anchor, with revenue growing steadily from IDR8.0tn in FY22 to an estimated IDR12.8tn by FY27F. Growth is supported by rising healthcare demand, expanding principal relationships, and deeper penetration across hospitals and pharmacies. Importantly, gross margin trends remain stable to slightly improving, and likely peaked around FY25F before normalizing. This combination of steady top-line expansion and resilient margins underscores the defensive and recurring nature of MDLA’s pharma distribution model, reinforcing its role as a stable cash flow generator within the group.

What matters?

The business has a few characteristics that make it attractive to principals (clients) and shareholders. For principals, the primary factors are reliability (service level) and scale (a one-stop solution).

The pharmaceutical segment is MDLA’s oldest segment; it originally started distributing Dexa Medica’s products and has since expanded to other principals like Novo Nordisk and Pfizer.

The pharma segment recorded a steady 6% CAGR revenue from 2021-2024, with margin percentages ranging from the high-7%s to the mid-8%s. Changes in margin are primarily a result of the product mix as the importance of scale and reliability outweighs the importance of pricing. Each product’s fee is a result of independent negotiations and the fees for MDLA tend to range from 7% to 10%.

The business has strong market share from its principals.

Consumer health segment

Fig. 15: Consumer health business – down because of losing one principal

MDLA’s consumer health revenue declined from IDR2.8tn in FY24 to IDR2.0tn in FY25F, before stabilizing and gradually recovering to IDR2.1tn by FY27F. The drop was driven by the loss of one principal in the premium milk segment, which faced weak demand amid downtrading as consumer purchasing power softened. The affected products were positioned at the high end of the market, making them more vulnerable during the economic slowdown, and the volume contraction was structural rather than execution-related. Yet, the contraction in the consumer health is being offset by the strong growth in the pharma space.

Despite the revenue reset, the consumer health segment continues to demonstrate margin resilience, with gross margin stabilizing at around the mid-8% level post-FY23. As the portfolio normalizes toward more mass market and essential consumer health products, we expect revenue growth to recover, supported by improving affordability and broader health awareness. Over time, this segment should remain complementary to MDLA’s core pharma distribution, enhancing customer reach and providing incremental margin upside without undermining overall earnings stability.

MDLA IJ’s consumer health segment focuses on the distribution and commercialization of over-the-counter products, supplements, and consumer healthcare brands that are directly sold through pharmacies, drugstores, and modern retail channels. The segment benefits from high-frequency demand, broad product penetration, and wide geographic reach, supported by MDLA’s nationwide distribution network and strong relationships with principals and retailers.

Consumer health products are typically non-prescription and cash-based, resulting in faster inventory turnover and lower credit risk compared to ethical pharmaceuticals.

Strategically, consumer health enhances MDLA’s earnings resilience and margin profile. Brand-driven products allow for better pricing power, higher gross margins, and more flexibility in promotions and bundling. As health awareness rises and preventive healthcare gains traction, the demand for supplements and wellness products continues to grow structurally. For MDLA, this segment also strengthens cross-selling with its pharmacy customer base, deepens shelf presence, and increases overall wallet share, reinforcing the “stickiness” of its distribution platform.

Medical devices segment

Fig. 17: Medical device revenue, growth and margins

MDLA’s medical device segment continues to scale steadily, with revenue rising from IDR1.3tn in FY22 to our estimated IDR2.0tn by FY27F. Growth is driven by increasing hospital activity, broader adoption of medical consumables, and MDLA’s expanding device portfolio. While revenue growth moderated around FY25F due to a normalization effect, the overall trajectory remains positive, reflecting the essential and recurring nature of medical device demand within the healthcare system.

Margin trends have normalized following a high base in FY22, with gross margin stabilizing at around the mid-14% level from FY24 onwards. Despite some volatility in y-y growth, particularly in FY25F, margins remain structurally higher than for pharmaceutical distribution, underscoring the segment’s higher value-added characteristics. Over time, we expect medical devices will continue to contribute to incremental growth and margin uplift to MDLA’s overall earnings mix.

MDLA focuses on consumables medical devices – products that are consistently used in the healthcare segment unlike the machinery. MDLA has three different business models for its Medical Device segment: pure-play distribution, agency and manufacturing.

• Pure-play distribution is a business that solely does distribution, and the principal keeps the sales and marketing responsibilities. This is the lowest-margin business.

• The agency business has a business model in which the distributor is also in charge of sales and marketing; this is a higher-margin business but does require significant headcount and salespeople.

• Manufacturing is when the business makes the product itself under its own brand, and thus can generate the highest margin – the products that MDLA produces are also those that can be used in a recurring manner, such as special wound bandages for surgery, among others.

Importance of working capital

MDLA’s revenue growth comes with structurally high working capital requirements, as reflected in the increase in net working capital from about 6.4% of revenue in FY21 to an estimated 14% by FY27F. We expect the increase to be driven by higher inventory buffers, broader SKU complexity, and expanding distribution coverage to support growth across pharmaceuticals, consumer health, and medical devices. This trend, in our view, highlights that sustaining top-line growth in healthcare distribution is balance sheet intensive, requiring disciplined capital allocation and strong liquidity management.

Fig. 19: High NWC requirements to sustain revenue growth

Fig. 20: Working capital days – big factor to manage cash flows

Working capital days have also trended upward, underscoring cash flow management as a key operational focus. NWC days increased from 61 days in 2021 to an estimated 82 days by 2027F, driven mainly by longer receivable and inventory cycles, partially offset by stable payable days. The elongation reflects MDLA’s role as an intermediary that absorbs timing mismatches between principals and customers, particularly hospitals and pharmacies. While this structurally weighs on free cash flow, it also demonstrates MDLA’s strategic importance within the healthcare supply chain, as its ability to finance working capital becomes a competitive advantage and a barrier to entry, in our view.

Fig. 21: Cash conversion cycle comparison with EPMT

Relative to peers, MDLA operates with a structurally longer cash conversion cycle than EPMT (not rated), reflecting its broader product mix, deeper hospital exposure, and more balance sheet-intensive distribution model. MDLA’s cash conversion cycle (CCC) increased from 19 days in FY21 to 28 days in FY24, driven mainly by rising receivable and inventory days as the company supported volume growth and wider SKU complexity. In contrast, EPMT’s CCC remained significantly higher in absolute terms at 58 days in FY24, highlighting differences in business mix and customer profiles, particularly EPMT’s heavier exposure to slower-paying hospital accounts.

Breaking this down, MDLA’s receivable days expanded from 45 days in FY21 to 56 days in FY24, above EPMT’s relatively stable 49 days, reflecting MDLA’s growing exposure to public and private hospitals with longer payment cycles. Inventory days also rose steadily to 48 days, broadly in line with EPMT, as MDLA carried higher stock buffers to ensure service reliability. Importantly, MDLA partially offsets these pressures through longer payable days, which increased materially from 61 days to 76 days, well above EPMT’s c.42 days. This supplier financing capability mitigates cash flow strain and underscores MDLA’s stronger bargaining position with principals, in our view, attesting to its role as a critical intermediary within the healthcare supply chain.

Fig. 22: MDLA books higher EBITDA improvement for every asset growth vs peers – highlighting working capital efficiency

MDLA has demonstrated superior capital efficiency versus peers, generating higher EBITDA growth for every USD100 of asset expansion. For FY25F, FY26F, and FY27F, we estimate MDLA to deliver EBITDA growth of 3.8%, 9.4%, and 10.7%, respectively, for every asset growth, consistently above peers at 3.5%, 4.9%, and 7.6% (see Fig. 22). In our view, incremental balance sheet deployment translates more effectively into earnings, reflecting better asset utilization, operating leverage, and scale benefits. Over time, this supports improving returns despite the business’s inherently working capital-intensive nature.

Fig. 24: Peers comparison – FY26F valuation metrics and dividend yield

Fig. 25: Peer comparison

MDLA IJ screens attractively versus regional healthcare distribution peers on both valuation and income metrics. The stock trades at around 8.6x 2026F P/E, a meaningful discount to the Bloomberg consensus peer average at about 13x, despite likely to deliver higher profit growth of 10.1% versus peers at 9.2% in 2026F. MDLA also offers a superior dividend yield of 4.7% in 2026F, on our estimate, above the peer average of 3.2%, reinforcing its appeal as a defensive compounder with visible cash returns. The valuation gap appears unjustified, in our view, given MDLA’s stable earnings profile and structural exposure to Indonesia’s fast growing healthcare market.

On profitability, MDLA’s ROE of 13% in 2026F remains below the peer average of about 19%, reflecting its more balance sheet intensive distribution model and higher working capital requirements. However, this is offset by stronger earnings visibility, lower volatility, and consistent cash generation, which support a sustainable dividend profile. Overall, we believe MDLA offers a compelling risk/reward trade-off: lower valuation and higher yield versus peers, with steady profit growth and improving returns, supporting our Buy stance.

Risks to our investment views are as below:

1. Regulatory / policy risk.
   Changes to BPOM regulations, JKN reimbursement rates, hospital pricing frameworks, or restrictions on pharmaceutical and medical device categories could disrupt volumes, delay product launches, and compress distributor margins across MDLA’s core businesses.

2. Demand risk.
   Slower-than-expected growth in healthcare spending—driven by weaker household consumption or tighter government healthcare budgets—could cap volume growth, particularly in discretionary segments such as consumer health and selected medical devices.

3. Operational / execution risk.
   Execution slippage in scaling margin-accretive initiatives, including medical devices, consumables manufacturing, and value-added healthcare solutions, could dilute the expected margin uplift and prolong reliance on lower-margin pure distribution activities.

4. Financial / balance sheet risk.
   MDLA’s growth model is working-capital intensive. Any further elongation in hospital payment cycles or deterioration in supplier terms could pressure operating cash flow, increase funding requirements, and limit ROE expansion.

5. Market / valuation / liquidity risk.
   Limited free float and relatively thin trading liquidity could heighten share price volatility and constrain valuation re-rating, particularly during periods of broader market risk-off sentiment or foreign outflows.