Ramsay Health Care Ltd (ASX: RHC) shares finished a tough week at $33.90.
This means the private hospital operator's shares are now down 32% from their 52-week high of $44.70.
Is this a buying opportunity for investors? Let's see what Macquarie Group Ltd (ASX: MQG) is saying about the ASX 200 stock.
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What is the broker saying about this ASX 200 stock?
Macquarie has been looking at the company's FY 2025 results. And while its revenue fell short, its earnings were in line thanks to stronger than expected margins. It said:
Group revenue was 1% below MRE, with better than expected group margins driving EBIT of A$1,043m in-line. Compositionally, AU underperformed, -9% vs MRE, with EBIT margin decline of 30bp YoY to 9.1% (-80bps vs MRE). This was due to elevated opex at Joondalup, return of Peel Campus, higher digital spend, QLD cyclone impacts. Sante more than offset this by margin improvement (+20bps YoY, +70bps vs MRE).
The broker was also pleased to see that the ASX 200 stock's spending is under good control and is not expected to increase in FY 2026. It adds:
Updated initiatives: AU Digital & Data strategy has been streamlined with FY25 spend $19m below original plan at $89m. FY26 spend is expected to be at or below this, with RHC not expecting a significant change YoY going forward. AU Theatre utilisation improved 3 percentage points to 73% in 4Q25. Along with higher revenue indexation from PHI contracts, we see the delivery of higher utilisation presenting potential earnings upside. Elysium performance plan underway with a focus on cost reduction and neuro services improvement over the next 12-18M.
But perhaps the biggest positive is that activity is expected to increase in all regions in FY 2026. As a result, earnings are expected to be heading higher in the new financial year. The broker commented:
Looking ahead: RHC expect activity growth in all regions in FY26. In AU, EBIT is expected to grow despite a $37m impact from lower pricing at Joondalup (MRE +4.8% YoY), with management expecting flat EBIT margins at ~9.1% (MRE in-line). We also adjust our assumptions to capture: 1) Net interest expense guidance of A$600-620m (MRE A $609m). 2) UK NHS tariff increase for 1-Apr 25 of ~2.83%. 3) Improved activity in France, albeit with 0.5% indexation. 4) Largely flat Elysium EBIT.
Good returns
According to the note, the broker has retained its outperform rating on the ASX 200 stock with a trimmed price target of $37.10 (from $39.80).
Based on its current share price, this implies potential upside of approximately 10%.
It also expects a 2.5% dividend yield in FY 2025, boosting the total potential return beyond 12%.
Commenting on the ASX 200 stock, Macquarie said:
Despite near-term downgrades driven by Joondalup, we see improving revenue trends and utilisation over the medium term. The potential sale of Ramsay Sante remains a positive near term catalyst. Together with undemanding valuations and TSR ~12%, we maintain Outperform.
