Is Fisher & Paykel Healthcare Share Price Still a Buy Post Raising its Guidance

  • August 19, 2020 03:57 AM NZST
  • Team Kalkine
Is Fisher & Paykel Healthcare Share Price Still a Buy Post Raising its Guidance

Summary

  • Hospital hardware sales of Fisher & Paykel have continued to steadily increase over the first four months of FY21 with over 390% cc revenue growth to the end of July compared to pcp.
  • Fisher & Paykel disclosed that, at current exchange rates, full-year operating revenue for FY21 would be ~NZ$1.61 billion and NPAT would be in the range of NZ$365 million to NZ$385 million.
  • The updated guide provided by the Company currently assumes that global hospitalisations requiring respiratory support would steadily return to normal by the end of the CY2020.
  • Fisher & Paykel designated an essential service and continues to manufacture as well as supply respiratory products from its Auckland facilities.

During this reporting season, many companies are updating their annual performance; some are heavily impacted by the turmoil while for some COVID-19 proving to be a boon.

NZ Government is playing a significant role to combat COVID-19 in the country. Recently, the Government shifted its stance on wearing a mask to protect from the novel coronavirus.

RELATED: NZ Government announces Wage Subsidy Extension following Extended Lockdown

There are some healthcare shares who reported outstanding performance in FY20 amid COVID-19 crisis. New Zealand market was buoyed after Fisher & Paykel Healthcare updated its better than expected results and guidance. On 18 August 2020, S&P/NZX50 settled at 11,849.130, indicating a rise of 1.51% and S&P/NZX All Health Care rose by 2.98% settled at 3,154.560.

Let us delve deep and discuss in detail about Fisher & Paykel Healthcare’s performance.

Fisher & Paykel’s Hospital Consumables Revenue Rose by 48% for the first four months of FY21

Dual-listed healthcare company, listed on ASX and NZX, Fisher & Paykel Healthcare Corporation Ltd (NZX:FPH) is a leading developer and marketer of products as well as systems for application in acute and chronic respiratory care, surgery, and treatment of OSA. The products of Fisher & Paykel are sold in over 120 nations across the world.

On 18 August 2020, Fisher & Paykel provided an update on its trading activities for the first four months of the financial year 2021.

For the period ended July 2020, robust demand for Hospital respiratory care products of the Company continues to track the spread of COVID-19 across the world. This signifies a transforming trend in clinical practice to lead with nasal high flow therapy for treating COVID-19 patients in the hospital. The impressive results follow the remarkable results for FY20 where NPAT was up 37%.

Financial highlights from the first four months of FY21-

  • Fisher & Paykel disclosed that its Hospital hardware sales have continued to steadily grow over the first four months of the fiscal year 2021 with over 390% constant currency (cc) revenue growth to the end of July 2020 compared to pcp.
  • With a very resilient finish to the 1Q FY21, for the first four months of the fiscal year 2021, hospital consumables revenue of FPH has increased by 48%.
  • Overall, hospital product group revenue has raised by 91%, compared to pcp and in terms of constant currency.
  • Revenue (constant currency) growth in OSA masks for the first four months of FY21 was 4% compared to the prior comparable period.
  • Growth in home respiratory support more than offset the decline in OSA flow generators, resulting in Homecare revenue growth of 5% to the end of July, in cc terms, compared to pcp.

Moreover, Fisher & Paykel notified that the global sales of both invasive ventilation as well as Optiflow consumables in July 2020 have returned to similar levels to the peak that was witnessed in April 2020.

This would suggest the usage of the greater installed base of Hospital hardware combined with a change of clinical practice to support nasal high flow therapy for COVID-19 patients.

Managing Director and CEO Lewis Gradon stated-

Notably, the Company disclosed that, at current exchange rates, full-year operating revenue for the fiscal year 2021 would be ~NZ$1.61 billion and net profit after tax (NPAT) would be in the range of NZ$365 million to NZ$385 million.

ALSO READ: Are there any Rock-solid NZX-listed Healthcare Stocks? A lens on AFT, FPH, GXH

Assumptions Made by Fisher & Paykel to Provide Guide

Because of the substantial uncertainty in the extent and duration of COVID-19 impact on the global requirement for products, Fisher & Paykel has made some assumptions to provide a guide to the potential impact on financial results for FY21.

The Company provided an initial set of assumptions on the full financial year announcement on 29 June 2020 and have now revised the set of assumptions used as COVID-19 has progressed across the world.

The updated guide currently assumes that global hospitalisations requiring respiratory support would return to normal steadily by the end of the CY2020. The guide also presumes that nations across the globe continue to build infrastructure for providing respiratory care, including the inventory of well-known ICU ventilators requiring humidifiers of Fisher & Paykel. Notably, the trend for nasal high-flow as a favoured frontline therapy persists for both non-COVID-19 as well as COVID-19 patients.

Status as Essential Service Amid Resurging of COVID-19 Cases

On 12 August 2020, Fisher & Paykel stated that it is designated an “essential service” following the announcement by the Prime Minister of New Zealand that the COVID-19 alert status would be raised to Level 3 in Auckland.

As an essential service, it will continue to manufacture as well as supply respiratory products from its Auckland facilities. Fisher & Paykel continued to operate effectively during March and April 2020 under the criteria of more restrictive lockdown (Level 4).

Stock Information: On 18 August 2020, the share price of Fisher & Paykel last quoted at NZ$36.500, an increase of ~4.29%. FPH has a market capitalisation of almost NZ$20.984 billion.

ALSO READ: NZ Market Darling Fisher & Paykel Demonstrates Value and Growth

Bottomline

During FY20, Fisher & Paykel Healthcare delivered outstanding results amid the COVID-19 turmoil, due to increased need for its respiratory care products. FPH demonstrated resilience and is well-positioned to adapt to this ‘new normal’ situation imposed by COVID-19. The guidance provided for FY21 by Fisher & Paykel proves that the Company is on the edge of setting new goals.

 


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