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Macquarie lifts F&P price target 7.3pc

NZ Newswire logoNZ Newswire 23/05/2017 Rebecca Howard

Macquarie Group lifted its 12-month target price on Fisher & Paykel Healthcare by 7.3 per cent and kept its 'outperform' rating.

This came after the company's full-year revenue growth beat expectations and as a weaker New Zealand dollar weighs in the exporter's favour.

The Australian investment house has a 12-month target price of $11, up from $10.25. The stock was recently unchanged at $10.10.

F&P Healthcare on Monday posted an 18 per cent gain in full-year profit, meeting guidance with record annual sales, and said revenue in the current year may reach $1 billion.

Profit rose to a record $169 million in the 12 months ended March 31, from $143m a year earlier, while operating revenue climbed 10 per cent to $894m.

"Revenue growth was stronger than expected, driven by a stronger-than-expected result from both home and hospital and higher-than-expected hedging gains," Macquarie said in its report.

However, it noted litigation costs over a patent dispute with ResMed were significantly higher than anticipated.

F&P Healthcare competes with Resmed and Respironics and is currently engaged in a patent dispute with Resmed which generated $20.7 million in legal costs in the 2017 year.

The company filed patent infringement proceedings against Resmed, which countered with its own suit claiming that F&P Healthcare's OSA (obstructive sleep apnea) products infringed its patents.

Macquarie said the stronger starting point and the lower New Zealand dollar assumptions - particularly against the euro and the British pound - supported higher revenue forecasts.

However, increased litigation costs in the short to the medium term offset those gains, which led to a downward revision in earnings.

"We do not expect these costs to feature to the same degree in the longer term, and as a result have longer-term upgrades," Macquarie said.

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