FPH Upgrades Guidance for Key Hospital Sector, Increase FVE to NZD 16.90 and AUD 16.00

Our investment thesis for narrow-moat Fisher & Paykel hinges on increased uptake of “new application” respiratory devices in hospitals and the upgrade in management guidance for fiscal 2020 confirms our long run outlook. “New applications” consists of noninvasive ventilation, high flow nasal delivery of gases and surgical humidification. The updated guidance cited an acceleration in the “new applications” growth from a base rate of 20% in fiscal 2019 and we upgrade our fiscal 2020 revenue growth assumption for this subsegment to 28% from 20%. As a result, we increase our fair value estimate to NZD 16.90 from NZD 16.40, and to AUD 16.00 from AUD 15.60. In addition, we upgrade our stewardship rating to Exemplary from Standard as the company continues to generate returns far in excess of the cost of capital.