Healius Earnings: Labor Costs Weigh on Margins, but Improved Funding and Productivity Await

No-moat Healius increased interim fiscal 2025 pathology revenue by a respectable 7% to AUD 642 million, below market growth of 11%. However, pathology EBIT grew just 2% to AUD 4 million as higher labor costs held EBIT margins largely flat at 0.6%. We decrease our fiscal 2025 EBIT forecast by 8% to AUD 30 million but expect a stronger second half on efficiency benefits being realized and a material skew in volumes. Now operating as a pure-play pathology provider, Healius intends to host an investor day in March 2025 to outline its plan to expand group EBIT margins to high-single digits in the medium term. Our fair value estimate decreases by 4% to AUD 2.20, due to a slight decrease to our fiscal 2034 10% EBIT margin forecast.