Barclays cuts price target for Mediclinic after 'disappointing' trading update

Barclays has called Mediclinic International’s latest trading statement disappointing, and has cut its price target on the stock.

The bank has also reduced its rating on the London-listed South African healthcare provider, to ‘equal weight’ from ‘over weight’.

On Wednesday, the FTSE 250 company warned that full-year profit margins would miss expectations because of weak growth in Switzerland, one of its core markets. It said group revenues were ahead just 1% for the first half, with weaker-than-expected growth in Swiss inpatient admissions and revenue per bed down 2.8%.

In a note published Thursday, Barclays said it was “disappointed” by the update, “which left us less confident in the recovery story.

“As a result, we are downgrading the stock to ‘equal weight’ from ‘over weight’; we see downside to the updated full-year guidance and believe that sentiment will remain subdued until we see clear execution and improvement in the businesses.

“While we acknowledge the seasonality in Switzerland, we believe the company will be hard pressed to achieve a full-year margin of 16% having posted a 14.3% margin in the first half. We see further deterioration in the insurance mix as a clear downside risk to the Swiss margin target.

“Fundamentally we believe management has limited visibility around where the mix will stabilise.”

Barclays’ new price target on the stock is 460p. Shares in the group have tumbled since the trading update, and by early afternoon in London on Thursday were off 10% at 354p.