HLS – Morgans rates the stock as Hold

Healius provided a trading update, expecting to report FY20 underlying earnings (EBIT) of $102m-$104m and underlying profit (NPAT) of $54m-56m. Morgans states that covid-19 impacts were seen across all segments, with Imaging and Day Hospitals/IVF faring the worst, while Pathology did better as covid-19 testing helped buffer declines across base testing.

The broker’s key takeaways include a strong recovery in Pathology since April, covid-19 testing increasing in recent outbreaks (but non-covid-19 testing down -5%-10%) and FY21 underlying earnings to ‘significantly’ increase with ongoing covid-19 uncertainty.

Morgans note that while the Sustainable Improvement Program is providing savings, other cost controls are temporary and at least $12m has been received in support via government programs.

The Hold rating is maintained. The target price is increased to $3.16 from $2.96

Sector: Health Care Equipment & Services.

Target price is $3.16.Current Price is $3.26. Difference: ($0.10) – (brackets indicate current price is over target). If HLS meets the Morgans target it will return approximately -3% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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