Equity Analysis /
Australia

AU : Pro Medicus - Back to Reduce on valuation grounds

    Iain Wilkie
    Iain Wilkie

    Analyst - Healthcare & Biotechnology

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    CGS-CIMB
    5 January 2022
    Published byCGS-CIMB

    In this note, we update our recommendation based on recent share price strength, which we view has run ahead of fair value in the short term. While FY22 is positioned to see a marked step-up (~40%) across all metrics with a large number of contracts signed in FY21 now active and billable, we view consensus over the next few years as fairly full with estimates set for >30% EPS CAGR growth over the next three years. We continue to view PME as a high quality name with a competitive product and long-term contracted revenues, but remain cautious on short-term valuation grounds, trading at 150x FY22F PE. Target price of A$54. maintained and move to a Reduce recommendation given current prices representing a ~14% downside to our valuation.