Ramsay Health Care (RHC) - At the margins

March 10, 2025

Ramsay Health Care Limited owns and operates hospitals in Australia, and internationally. The company offers health care services to public and private patients.

Accounting changes created some noise around the first-half FY25 result, but earnings were in line with market expectations, driven by stronger-than-forecast performance in Ramsay's Australian operations and UK division that offset earnings in its French and Nordic divisions that fell a long way short of consensus estimates.

The Australian hospitals operations is the flagship asset in Ramsay’s business, but we struggle to see easy margin improvement from here given rising labour costs in the industry and continuing ructions overpayment rates from private health insurers. Meanwhile, Ramsay Santé, which houses its European operations, continues to drag on group performance. The company flagged the possible sale of the Santé business citing low returns and limited benefits from the offshore operations.

We remain concerned about margin prospects for Ramsay, which, along with the difficulty in making accurate forecasts of those, led us to cut our target price to $38.60 from $41.45. We maintain a Hold recommendation.

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