Fisher & Paykel Healthcare Corporation Limited
FPH Details
This report is an updated version of the report published on 14 April 2022 at 3:45 PM GMT.
Financial Performance of 1HFY22 (Ended 30 September 2021): Fisher & Paykel Healthcare Corporation Limited (ASX: FPH) is a manufacturer and marketer of products and systems for usage in surgery, respiratory care, acute care, and sleep apnea therapy.
- The hospital consumables business witnessed ~8% Y-o-Y growth on a constant currency basis in 1HFY22 and accounted for ~67% of the total Hospital product group revenue. The Homecare product group revenue increased slightly by ~0.3% Y-o-Y to ~$226.9 million in 1HFY22.
- The company invested ~$75.7 million (~8% of operating revenue) in the R&D of new products for the first six months ended on 30 September 2021.
Trading Update: In the Homecare product group, FPH is witnessing growth in the 2HFY22 sales of its OSA masks above the 1HFY22 growth rate despite supply challenges of treatment hardware in the market.
Comparative Cashflows Summary; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of technological shifts, supply chain disruptions, forex rate changes, and evolving regulations in the healthcare space.
Outlook:
- FPH plans to release the financial results on 25 May 2022 and hold a conference call to discuss the FY22 financial results. It will conduct an Investor Day event on 26 May 2022 in Auckland.
- FPH anticipates operating revenue ~NZ$1.675 - ~NZ$1.70 billion for FY22 at current exchange rates, with its 2HFY22 hospital consumables revenue presently advancing to be like the 1HFY22 hospital consumables revenue. It expects freight rates to remain at higher levels.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of FPH gave a negative return of ~30.13% in the past three months and a negative return of ~26.61% in the past six months. The stock is currently trading near its 52-weeks’ low level of $20.640. The stock has been valued using the P/E based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ mean P/E multiple, considering increased investment expenditure, freight costs, and expected impact on gross margins. For this purpose of valuation, a few peers like Cochlear Ltd (ASX: COH), Ramsay Health Care Ltd (ASX: RHC), Pro Medicus Ltd (ASX: PME), and others have been considered. Considering the low trading levels, growth in hospital consumables business, continued investments in the infrastructure for long-term growth, a robust product pipeline, plans to add additional manufacturing facilities, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $20.690, as of 14 April 2022, 10:39 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
FPH Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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