Credit Suisse analyses the opportunity for profitability to improve in pathology as the company sells its medical centre businesses.
Healius is less profitable relative to to Sonic Healthcare ((SHL)) because of a larger collection centre footprint, higher rents and less complex test mix.
Hence, reducing rental costs is a key area to improve profitability.
The broker expects the pathology earnings (EBIT) margin will expand to 11.6% in FY22 from 9.8% in FY19. Outperform rating and $3.25 target maintained.
Sector: Health Care Equipment & Services.
Target price is $3.25.Current Price is $3.03. Difference: $0.22 – (brackets indicate current price is over target). If HLS meets the Credit Suisse target it will return approximately 7% (excluding dividends, fees and charges – negative figures indicate an expected loss).
