Macquarie reviews the pathology margins, noting these have declined over time but expansion is now likely to FY23.
Contributions from Covid-19 testing as well as a recovery in base volumes are positive indicators going forward. There is also opportunities for growth, given an improved balance sheet.
A demonstration of operating leverage within pathology will be a catalyst for a multiple re-rating, in the broker’s view. Outperform retained. Target rises to $3.80 from $3.70.
Sector: Health Care Equipment & Services.
Target price is $3.80.Current Price is $3.33. Difference: $0.47 – (brackets indicate current price is over target). If HLS meets the Macquarie target it will return approximately 12% (excluding dividends, fees and charges – negative figures indicate an expected loss).
