Sonic Healthcare Limited

Section 1: Company Overview and Fundamentals Insights

1.1 Company Overview

Sonic Healthcare Limited (ASX: SHL) is a provider of healthcare services, and it is engaged in specialist operations in laboratory medicine/pathology, radiology, general practice medicine, and corporate medical services.

1.2 The Key Positives, Negatives, Investment Highlights, and Risks

1.3 Top 10 Shareholders: The top 10 shareholders together form ~25.81% of the total shareholding. The Vanguard Group, Inc. and Veritas Asset Management LLP are holding a maximum stake in the company at ~5.00% and ~4.88%, respectively.

1.4 Key Metrics: The asset turnover ratio in FY22 was around 0.77x, which increased from 0.73x in FY21. Further, the debt-to-equity ratio improved in FY22, which was around 0.41x compared to 0.51x in FY21. Below is captured the trend of current ratio and EBITDA margin:

Section 2: Business Updates and Financial Highlights

2.1 Business Updates:

2.2 Results Highlights of FY22: During FY22, the company generated a revenue of AUD 9,340mn compared to AUD 8,754mn in FY21. During FY22, SHL reported a net profit after tax of around AUD 1,460.57mn, up from AUD 1,315.04mn reported in FY21, reflecting healthy operating leverage.

2.3 Trading Update: The company maintained its progressive dividend strategy, and in FY22, it issued the total divided on AUD 1.00 per share compared to AUD 0.91 in FY21, recording a 10% YoY growth.

Section 3: Key Risks and Outlook:

Section 4: Stock Recommendation Summary

4.1 Price Performance and Technical Summary

4.2 Fundamental Valuation

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 14, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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