Ramsay Health Care Earnings: Shares Undervalued Despite Challenging Outlook

We cut our fair value estimate for narrow-moat Ramsay Health Care by 9% to AUD 62. Fiscal 2024 revenue from patient activity grew 7% in constant currency to AUD 16.7 billion, in line with our expectations, driven by 3% volume growth, tariff uplifts, and new capacity. However, underlying EBIT of AUD 1.034 billion was up a smaller 6%, and 9% below our forecast. The result was dragged down by underlying EBIT in France falling 21%. The decline largely reflects lower government support that is significantly lagging cost inflation. While future earnings in France are supported by a 3.2% tariff increase from July 2024, indexation will be 0.6% in the UK, and, overall, wage growth is likely to outpace tariff indexation in Europe.