Ramsay Health Care Limited (RHC)
BUY

Operating improvement

 11 Nov 2022
Sector: Health Care

1Q23 UPDATE

Need To Know

  • Volume growth returns to hospital admissions.
  • COVID costs fell dramatically 1Q23.
  • Well placed to see earnings recovery into 2023/24.

Improving activity levels across all areas of the RHC business, as the economy reopens and COVID costs/staffing issues dissipate.  Monthly COVID costs have fallen from $44m in July to $6m in September. Total COVID costs $64m over the quarter.

1Q Financials: revenue growth>earnings growth. This reflects the prioritisation of higher value surgery admissions offset by higher COVID costs, Queens public holiday in September, and suboptimal productivity levels, particularly with staffing levels/mix.  

Looking forward EBITDA growth should exceed revenue growth as COVID costs fall and productivity levels improve – particularly with regard to impacts on staffing and productivity levels.

Figure 1:  RHC unaudited earnings for the three months 30 September 2022

Source: Company Data.

Investment Implications

We see RHC as a stand-out COVID recovery into 2023 as volumes recover and costs fall out of the business. We expect this to become clear in 2H23.

We estimate a 20%-plus deficit of care across most healthcare systems and the catch-up may take years. Overwhelmed Public Hospital systems will need the assistance of private hospitals to fix it. We retain our Buy rating.

Figure 2: RHC 12mth forward PER

Figure 3: RHC EBITDA improvement to come in 2023/24

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Stock overview

Share Price

Company overview

Ramsay Health Care Limited is an Australia-based healthcare services company. The Company operates through four segments: Asia Pacific, UK, France, and Nordics.

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