Sigma Healthcare Earnings: Shares Overvalued, With Result Largely As Expected

No-moat Sigma Healthcare’s fiscal 2025 underlying EBIT was up a strong 117% to AUD 68 million, but was close to our expectations and around the midpoint of prior company guidance. Revenue increased more than we expected, growing 46% to AUD 4.8 billion on higher volumes of prescription medicines supplied to Chemist Warehouse, or CW. However, second-half gross margins compressed more than we expected, down roughly 110 basis points sequentially to 5.4%. This was mainly due to the sales mix shifting to lower-margin prescription medicine, and the net impact on gross profit was largely neutral. We keep our AUD 1.65 per share fair value estimate and our long-term estimates are largely unchanged. We intend to adjust our forecasts to align with the firm’s new financial year ending in June shortly.