Fisher & Paykel Healthcare Corporation Limited (FPH)
HOLD

Still recovering

 29 Aug 2023
Sector: Health Care

TRADING UPDATE

Need To Know

  • 1H24 earnings downgrade, with NPAT at NZ$95-105m well below ~NZ$125m expectations
  • Full year revenue guidance of NZ$1.70bn unchanged with sleep masks outperformance, offset by weaker hospital hardware sales
  • Operating expenses are expected to be consistent with previous guidance, as gross margins show improvement, approaching 200bps above FY23

Investment Implications

At its AGM today, FPH provided a trading update for its expected 1H24 results, where it expects revenue to be NZ$790m, and NPAT between NZ$95-105m. The revenue figure is only marginally below consensus expectations for ~NZ$803m, however NPAT is well below expectations for ~NZ$125m. FPH did however reaffirm its full year FY24 guidance for NZ$1.70bn revenue, implying a strong split to 2H. All figures above are based on constant currency, with fluctuations likely to impact the actual numbers.

Whilst little further detail was provided, FPH did comment that in the first 4 months of the financial year, revenue from OSA masks was stronger than expectations, offset by weaker hospital hardware sales. Gross margins are improving, with them approaching 200bps above FY23 levels.

Operating expenses are tracking in-line with many initiatives underway, as the business returns to normalised supply volumes, as opposed to the supply-at-all-costs approach during the pandemic. FPH expect continued positive impacts build throughout the year. 

Investment View

Trends continue to improve for FPH, however not at the rate that the market was expecting. FPH still expects to return to revenue growth in FY24 and is guiding for margin improvement, albeit this is unlikely to be a linear recovery. The Covid destocking has largely unwound, and the new mask product is clearly gaining positive momentum. However, FPH is trading well ahead of its historic multiples, and with some headwinds in mask competition with the return of Philips, the excessive forward PER of ~44x remains too enthusiastic for us to warrant a more positive call. We retain our Hold recommendation.

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Stock Overview

Share Price

Company Overview

FPH is a leading healthcare designer, manufacturer, and marketer of medical devices for respiratory care, acute care, and the treatment of obstructive sleep apnea.

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