Spire Healthcare Group Plc (LSE:SPI) is poised to benefit from resilient UK healthcare market conditions, according to a research note from Jefferies, which has upgraded the company's rating to 'buy'.
The investment bank increased its revenue estimates for Spire by 4-6% between 2023 and 2025, citing continued private volume demand and further pricing/mix benefits.
Its independent data analysis, tracking web traffic, indicates that Spire has had a strong start to the year compared to its peers and that demand remains elevated year-to-date.
Although Jefferies has cut its 2023 adjusted EBITDA estimate by 2% to account for inflationary pressures, mainly from salary costs, the bank believes Spire's profitability will remain resilient.
This is due to the company's pricing/mix strategy and the tailwind from declining Covid costs and efficiency cost-saving programs.
The investment bank argues that the market is under-appreciating Spire's growth opportunity, given the unique dynamics of the UK healthcare market, including a significant NHS waiting list and labour challenges.
It highlights that the improvement of profitability and management focus on asset efficiency should also improve returns for shareholders.
Jefferies has raised its price target for Spire to 250p, reflecting the company's relatively high compound annual growth rate (CAGR) outlook and the quality and resilience of its business.
The stock ended the day up 1.5p at 230p.