Siemens Healthineers Downgrade

Overview
Siemens Healthineers AG (ETR:SHLG) has been downgraded by UBS from a ‘buy’ to a ‘neutral’ rating due to concerns over medium-term growth prospects.

Key Issues

The downgrade is primarily attributed to challenges in the Chinese market and rising competition from local companies like United Imaging and Mindray.

Market Leadership

UBS analysts highlighted that Siemens Healthineers has historically thrived in imaging technology, particularly in China, a major growth area.

Current Outlook

However, the outlook for China appears grim. UBS projects the market to be flat in fiscal Q1 and anticipate a modest growth of only 5-10% thereafter even with the projected economic stimulus in 2025.

Competitive Landscape

Local firms are expected to capture market share from established Western competitors, indicating a potential drop in growth rates. Analysts forecast a decline in Imaging market growth for Western players from 5% to 3%.

Financial Forecasts

Consequently, UBS has revised its financial outlook for Siemens Healthineers, expecting a revenue decline of 1% to 3% from 2025 to 2028, and an adjusted earnings per share drop of 2% to 6%.
The price target for Siemens Healthineers has also been reduced from €56 to €51, influenced by lowered earnings forecasts and terminal growth rates.

Quality Concerns

Despite these challenges, UBS acknowledges Siemens Healthineers as a high-quality business with strong market positions in imaging and medical technology, but the growth potential is seen as increasingly constrained due to competition and economic conditions.