2 ASX 200 healthcare shares just upgraded by Citi analysts

Two happy scientists analysing test results.

Two happy scientists analysing test results.

The latest expert views on two S&P/ASX 200 Index (ASX: XJO) healthcare shares have just come in.

It’s positive news for shareholders of both companies because the broker has improved the rating of those businesses.

Healthcare is an interesting sector for investing in. It’s seen as defensive because many of them can benefit from ongoing patient demand, regardless of the economic situation – most people don’t choose when to get sick. I’d imagine being alive and healthy is a priority for most people, so they’d be willing to spend on healthcare services.

But, there are also some positive tailwinds for the sector, including an ageing population, a growing population and increasingly advanced healthcare treatments.

Let’s look at two of the latest ratings.

Pro Medicus Limited (ASX: PME)

Pro Medicus describes itself as a leading medical imaging IT provider. It provides a range of radiology IT software and services to hospitals, imaging centres and healthcare groups around the world.

The broker Citi has just increased its rating on the ASX 200 healthcare share to neutral. Citi’s price target on Pro Medicus was raised to $61. A price target is where the broker thinks the share price will be in 12 months from when the call was issued.

Therefore, the broker doesn’t think the Pro Medicus share price is going to move much from here.

In the company’s FY23 half-year result, it reported that revenue went up 28.3% to $56.9 million, while net profit after tax (NPAT) improved by 31.5% to $27.2 million.

The Pro Medicus boss Dr Hupert said that the company’s pipeline remains strong:

We have a very good spread of opportunities across different market segments, with opportunities in academic/IDN, corporate and private markets. Pretty much all of them are cloud-based with a growing number looking for our “full stack” solution which includes all three of our modules, namely Viewer, Archive and Worklist; a trend we see continuing.

Sonic Healthcare Limited (ASX: SHL)

The other ASX 200 healthcare share that Citi likes the look of is Sonic Healthcare, the global pathology business.

Citi increased its rating on Sonic Healthcare to buy. The price target on Sonic Healthcare is $36. That implies a possible rise of 8% for the business.

While the business saw the FY23 half-year earnings drop as COVID-19 testing slowed, its profit is still significantly higher than the FY20 first half – the pre COVID times. Compared to HY20, the FY23 half-year total revenue was up 22%, operating cash flow was up 47% and net profit after tax (NPAT) was up 50%.

Its non-COVID testing revenue and earnings continue to grow, as does the dividend. It has a progressive dividend policy, meaning that the board wants to grow the dividend each year.

The ASX 200 healthcare share is focused on automation and other efficiency gains, as well as procurement savings, which could help it maintain and grow its margins.

Sonic Healthcare is also hoping to win more outsourcing contracts from hospitals and other healthcare providers. It’s also progressing “additional acquisition opportunities to add to future growth.”

The post 2 ASX 200 healthcare shares just upgraded by Citi analysts appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Pro Medicus. The Motley Fool Australia has positions in and has recommended Pro Medicus. The Motley Fool Australia has recommended Sonic Healthcare. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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