Healius: Revised Guidance Reflects Weak Pathology Margins but Is Poised for Recovery

No-moat Healius downgraded fiscal 2024 EBIT guidance by 25% at the midpoint of AUD 70 million-AUD 80 million. This was due to industry growth moderating significantly late in 2023 because of softness in general practitioner attendances and resulting pathology referrals. GP shortages and cost-of-living pressures are hurting pathology growth, and given its own inflationary cost pressures, Healius must resize its labor and infrastructure costs. We reduce our EBIT forecasts by 15% on average over the next two years on 2% lower forecast revenue and margins contracting more than we previously expected. However, our long-term estimates are broadly unchanged, including our midcycle EBIT margin forecast of 14%.