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Strong HY21 result: Fisher & Paykel Healthcare (ASX:FPH) shares up

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) shares are up after it announced a strong FY21 half-year result.

HY21 report

Fisher & Paykel Healthcare announced its half-year result to 30 September 2020 which showed that operating revenue grew by 59% to $910.2 million.

The result was driven by the increased demand for the company’s hospital hardware, in-particular its Optiflow and Airvo systems. This reflected a shift in clinical procedure to using nasal high flow therapy as a front-line treatment for COVID-19 patients in hospital.

In the hospital product group, which includes products used in acute and chronic respiratory care and surgery, operating revenue grew 93% to $681 million. Hospital products made up three-quarters of the company’s operating revenue.

In the homecare product group, which includes products used in the treatment of obstructive sleep apnea (OSA) and nasal high flow therapy in the home, operating revenue grew 5% to $226.2 million. Since the COVID-19 pandemic started, many sleep clinics have been closed resulting in a new patient diagnoses.

However, there was a reduction in the gross margin for the half-year to 61.7% because of increased use of air freight. Excluding the extra freight costs, the gross margin was in line with the previous half.

Net profit after tax surged 86% to $225.5 million.

Fisher & Paykel Healthcare dividend

The board of Fisher & Paykel has increased the interim dividend by 33% to 16 cents per share.

FY21 guide

Fisher & Paykel Healthcare can’t predict the course of COVID-19, the ability to bring it under control, the progress of a vaccine and so on.

But, using some assumptions which I’ll outline in a moment, Fisher & Paykel is guiding full year operating revenue of $1.72 billion and net profit after tax of between $400 million to $415 million.

Those assumptions include a return to normal sales levels for hospital hardware, the use of hospital hardware back to normal rates in the second half of the financial year, a continued reduced rate of OSA diagnosis rates because of limited access to customers and higher freight costs remain elevated resulting in a reduction of the gross margin of approximately 200 basis points (2%).

Summary thoughts

Fisher & Paykel Healthcare has been an integral business for treating patients who need hospital care because of COVID-19.

Its earnings are elevated right now, but the company could see things slow down during 2021 as a vaccine (hopefully) is distributed throughout the world.

I like the business, but I’m not sure the Fisher & Paykel Healthcare share price is a buy considering a vaccine is getting close(r). There are other ASX growth shares that have grown faster that could hold onto their growth such as Pushpay Holdings Ltd (ASX: PPH) which has more long term growth potential.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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