On Thursday, Siemens Healthineers AG (SHL:GR) (OTC: SEMHF) experienced a change in stock rating as UBS downgraded the company from Buy to Neutral. Alongside this adjustment, the price target was also reduced to EUR51.00 from the previous target of EUR56.00.
The downgrade was prompted by the anticipated underperformance in the significant Chinese market, which is expected to hinder growth in the short term.
UBS's assessment of Siemens Healthineers underscores the company's standing as a market leader in the Imaging sector, renowned for delivering high-quality products. However, the firm projects that growth in China will fall short of expectations, even with a potential stimulus in 2025. This outlook positions UBS's forecasts for Siemens Healthineers 5% below the consensus for the next year.
Looking at the mid-term, UBS anticipates emerging Chinese competitors to capture market share, which is likely to reduce the growth rate for Western Imaging market players from 5% to 3%. This shift is expected to moderate the growth trajectory for Siemens Healthineers.
The firm's analysis, detailed in their recently published deep dive Q-Series, suggests that the subdued growth will prevent Siemens Healthineers from achieving above-sector growth, which in turn has led to the revised Neutral rating.
Concluding their statement, UBS acknowledged the intrinsic quality and strong market positions of Siemens Healthineers. Nevertheless, the absence of expected above-sector growth has led to the conclusion that the shares are unlikely to experience a re-rating compared to the sector. As a result, UBS has opted to lower their rating to Neutral.
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