Fisher & Paykel Healthcare Limited (FPH:ASX)

Last update - 19 May 2023 By James Woods

Fisher & Paykel Healthcare (FPH), is a leading global medical device company, that excels in creating innovative products and systems for acute and chronic respiratory care, surgery, and obstructive sleep apnea treatment. These offerings cater to a diverse array of healthcare settings, from hospitals to homecare.

The global healthcare sector is experiencing surging demand for medical devices and systems, fuelled by an aging population, increasing chronic disease prevalence, and technological advancements. Fisher & Paykel Healthcare is strategically positioned to capitalize on these trends, boasting a robust product portfolio and extensive R&D capabilities to address the growing demand for innovative medical devices and systems in respiratory care, surgery, and sleep apnea treatment. The company is also committed to expanding its global presence, leveraging its strong market position in the United States, Europe, and the Asia-Pacific region to penetrate emerging markets and seize untapped growth opportunities. The United States and Europe remain key areas of revenue, accounting for 39.5% and 27.8% in 2022 respectively, while the Asia-Pacific region is of growing importance, increasing to 26.1% from 17.5% in 2016.

In acute and chronic respiratory care, Fisher & Paykel Healthcare is renowned for its extensive solutions used within hospital environments. Their offerings, including humidifiers, ventilators, and related consumables such as breathing circuits and chambers, are crucial in managing conditions like acute respiratory distress syndrome (ARDS), chronic obstructive pulmonary disease (COPD), and asthma. With aging populations and environmental pollution driving an increase in chronic respiratory diseases worldwide owing to factors including aging population and environmental pollution, FPH’s cutting-edge product line-up caters to the needs of patients in both hospital and homecare settings.

The company has also made significant inroads in the surgical domain, providing indispensable devices like warming and humidification systems that maintain patients’ body temperatures during surgical procedures. Their innovative surgical solutions contribute to reducing surgical site infections and improving patient outcomes. As the demand for minimally invasive procedures and enhanced patient outcomes escalates, Fisher & Paykel Healthcare’s essential devices play a vital role in ensuring optimal patient care during surgical procedures.

Fisher & Paykel Healthcare holds a reputable position in the realm of obstructive sleep apnea (OSA) treatment. The company’s impressive array of continuous positive airway pressure (CPAP) machines, masks, and accessories have revolutionized homecare treatment for OSA patients, offering effective and user-friendly solutions. With obesity as a major contributing factor, the prevalence of sleep apnea is increasing globally, positioning FPH at the forefront of delivering advanced homecare treatment for sleep apnea patients.

The company’s revenues are geographically diverse, with 39.5% generated from the United States, 27.8% from Europe, 26.1% from the Asia-Pacific region, and the remaining 6.5% from emerging markets. In the past five years, FPH’s sales revenue has grown significantly, climbing from NZ$980 million in 2018 to NZ$1.68 billion in FY 2022, boosted by the COVID-19 pandemic. Earnings per share have also risen markedly, from NZ$0.35 in 2018 to NZ$0.65 in 2022. During this period, EBITDA margins have remained stable, averaging 36%, with net income margins averaging 23%.

FPH is set to release its financial results for the year ended March 31, 2023, on May 26th. This highly anticipated release will offer investors valuable insights into the company’s performance, prospects, product innovations, and market position in a post-COVID world. Management released FY2023 guidance back in January, expecting full year operating revenue for the 2023 financial year to range between NZ$1.55 billion to NZ$1.60 billion, with the average analyst estimate sitting at NZ$1.583 billion and earnings per share of NZ$0.44. Based on forward p/e multiples for 2023 through to 2025, FPH trades broadly in line with the ASX200 health care sector but commands a sizeable premium to the broad ASX200.

FPH’s share price has risen 18.28% year-to-date, making it one of the top-performing stocks within the ASX100. Over the past six months, it has returned 30.87%, ranking it as the fifth-best-performing stock over that period. However, analysts maintain a mixed outlook, with roughly equal portions recommending buy, hold, or sell. With an average 12-month price target of $22.89, the current share price implies -9% downside from current levels, although it is not uncommon to see broker targets revised higher in line with share movements.

In conclusion, Fisher & Paykel Healthcare’s focus on addressing the growing demand for innovative solutions in respiratory care, surgical applications, and sleep apnea treatment places the company in a strong position within the burgeoning healthcare sector amid an aging population. As a trusted partner in both hospital and homecare settings, FPH derives its revenues from a global customer base and the company’s commitment to enhancing patient care while driving innovation continues to solidify its role as a leader in the medical device industry.

As long as the share price continues to outperform on a relative basis it will remain an active buy recommendation within the momentum component of the ASX Growth portfolio.

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