Sonic Healthcare FY26 Result Preview: Challenging to navigate cost pressures; Underweight

Research evidence excerpt

Sonic Healthcare FY26 Result Preview: Challenging to navigate cost pressures; Underweight

Chris Cooper, ACA CFA AC Asia Pacific Equity Research

(61 2) 9003-6221 20 July 2026 J P M O R G A N

chris.cooper@jpmorgan.com

Price Performance Summary Investment Thesis and Valuation

Investment Thesis

While there are some more positive signs for SHL, the company

has limited pricing power to mitigate wage/input cost pressures,

is currently uncompetitive in key US markets and faces the

prospect of meaningful reimbursement pressure in its largest

market, Germany. Valuation at 16x 12m forward P/E is at 10-

year lows and, while an EPS CAGR of +8.8% (FY26-28e)

appears solid, there is meaningful risk to both the revenue and

cost profiles, and we believe a discount to reflect a challenging

ROIC trajectory is appropriate. To become more positive, we

YTD 1m 3m 12m would like to see evidence that SHL is able to capture the more

Abs -4.1% 8.1% 6.6% -21.5% supportive industry dynamics. We welcome a rethink in the US,

Rel -5.0% 8.6% 8.5% -22.9%

but need to see what eventuates after such prolonged

Company Data underperformance in a market trending positively. A more

Shares O/S (mn) 494 circumspect approach to M&A could limit growth but preserve

52-week range (A$) 29.24-18.26 cash and allow the company to generate ROIC accretion, which

Market cap ($ mn) 7,480.77

Exchange rate 1.43 could be a superior outcome for shareholders.

Free float (%) 99.0%

Valuation3M ADV (mn) 2.05

3M ADV ($ mn) 28.6 Our Jun-27 price target of $19.6/share is based on a target P/E of

Volatility (90 Day) 23 15.2x, derived as a blended average of 12-month forward P/E

Index ASX 200

BBG ANR (Buy | Hold | Sell) 5|8|4 multiples: i) company peers (30%); ii) sector (40%); and iii)

DCF-implied valuation (30%).

Key Metrics (FYE Jun)