Fisher & Paykel’s Hospital Business Drives Strong Half-Year Result, Maintain NZD 17.30 FVE

Fisher & Paykel is a business of two halves--the narrow-moat-rated hospital business that is growing strongly and contributed 62% of revenue in the half year, and the no-moat-rated homecare segment that is shrinking. We expect this relative performance dynamic to continue in the medium term with the hospital division to make up 72% of revenue by fiscal 2024. Adoption of the company’s “new applications,” primarily the Optiflow nasal high flow device and associated myAIRVO humidifier, as a new clinical standard both inside and outside hospital ICU settings is gaining traction. With current penetration levels estimated by Fisher & Paykel at only 20% to 30%, the runway for growth is long and our forecasts include this subsegment growing at 20.3% compounded to fiscal 2024. The company says initial studies supporting its use in the homecare environment have started, which augurs well for the long run growth in the homecare division, however, it typically takes at least a decade for a new clinical standard to be adopted. Consequently, we expect subdued performance from this division in the next five years.