Australian Healthcare: Finding opportunity in the AUS Healthcare P/E de-rate

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Australian Healthcare: Finding opportunity in the AUS Healthcare P/E de-rate

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Australian Healthcare

Finding opportunity in the AUS Healthcare

P/E de-rate

Industry Overview

AUS Healthcare P/E has more than halved 23 June 2026

Since 2021, AUS healthcare has materially de-rated, with AS51HC P/E compressing from Equity

c40x in 2020 to c17x in June 2026 (10yr avg: 29.5x) – Exh1. The sector now trades in Australia

line with both the ASX200 and global healthcare peers, with the move largely multiple Healthcare

driven rather than earnings led – Exh2. Lyanne Harrison >>

Research Analyst

Merrill Lynch (Australia)Earnings durability questioned

+61 2 9226 5028

While ASX healthcare has historically commanded a premium (due to high-growth, lyanne.harrison@bofa.com

globally diversified revenue), this has been eroded by competitive pressures and funding Elizabeth Davies >>

& reimbursement constraints. Against this backdrop, the largely mono-line nature of Research Analyst

Merrill Lynch (Australia)

ASX-listed healthcare has exposed earnings resilience shortcomings, suggesting the +61 2 9226 5078

sector no longer warrants a sustained premium to the broader market or global peers. elizabeth.davies2@bofa.com

Reset done, FY27 inflecting

In our view, the derating of AUS large-cap healthcare is largely complete (currently Glossary

trading at 10yr low). We see opportunity as visibility is improving as key headwinds de- AS51: ASX200 Index

risk; and focus on capital discipline should drive a recovery in returns. We expect ROE to AS51HC: ASX200 Healthcare Index

trend higher into FY27, supported by topline growth and operating leverage. These BF: Blended Forward

tailwinds should support an upward re-rating (albeit more moderate than peak COVID COH: Cochlear Limited

levels).