Research notes

AX1 hosted an Investor Day, outlining its 2030 strategic plan, targeting sales of $1.9bn, 9%+ EBIT margin and 950 stores. This will be driven by operating efficiencies (cost out and store optimisation), growth of sports related banners (Sports Direct, TAF) and growth in vertical owned brands. AX1 also outlined a pathway to profitable growth in FY27, underpinned by closure of loss making Glue/ OzSale, TAF reacquisitions, cost efficiencies and FX tailwind. We have made no changes to our FY26 forecasts, but increase our EBIT by 2%/1% in FY27/28 incorporating further cost efficiencies. We retain our BUY recommendation and target price of $0.75.

HLS has materially downgraded FY26 earnings, which we find disappointing given reiterated consensus-aligned guidance at the 1H26 result only three months ago. While Pathology cost control continues to improve and labour optimisation initiatives are gaining traction, weaker volumes, ongoing GP softness and mounting regulatory/funding pressures are offsetting operational progress. Agilex continues to perform relatively well, and HLS has commenced a strategic review following unsolicited interest in the asset. However, the extent to which value can be crystallised above the original high acquisition multiple remains uncertain given the business’ modest scale and inconsistent earnings trajectory. While a potential Agilex sale could provide balance sheet upside, the downgrade reinforces that sustainable margin recovery within core Pathology remains elusive. We adjust FY26-28 estimates, with our target price decreasing to A$0.41. HOLD.

Aristocrat Leisure (ALL) 1H26 result beat our forecasts and came broadly in line with consensus, despite management's prior flagging of a softer than usual 1H skew. Gaming was the clear standout - strong outright sales on continued Baron cabinet demand and solid leased adds in a thin content period. Product Madness and Interactive came in below our forecasts, though the latter is complicated by a D&D reclassification and acquisition drag that flatters the headline miss. Greater clarity on the FY26-29F earnings shape is expected at the July investor day. Capital management remains a key pillar - a $1bn buyback extension marks $5.1bn returned over five years, underpinned by a fortress balance sheet at 0.3x net debt/EBITDA. We now assume a normalised 1H/2H skew and incorporate ~$100m in annualised savings in FY27, lifting EPSA 3% and 4% for FY26-27F respectively. Target price increases to $67.00 (prev. $63.00), Buy retained. Today's reaction is largely a relief rally following recent downgrade risk - in our view, this result provides a solid runway of land-based earnings clarity over the next 6-12 months.

3Q26 earnings were below 1H26 growth expectations, both before and after the impact of topping up loan loss provisions. The balance sheet as per the CET1 capital ratio also looks a little tighter than we had previously budgeted. FY26-28 EPS forecasts downgraded c.3-5%. Target price reduced 4% to $119.40. SELL retained, with potential total return of c.-19% at current prices (including c.3.3% dividend yield). Even after today’s c.10% sell-off, CBA’s valuation metrics remain extended and don’t provide a sufficient margin of safety.

ALQ's recent share price weakness reflects a perfect storm of headwinds – slowing organic growth from offshore peers, FX pressure, Middle East exposure, and concerns around fuel availability. We have sought to capture the first three in our forecasts and see limited net impact at the group level, as softer Life Sciences growth is offset by a stronger Commodities outlook. Fuel availability is an unknown, though we view any disruption as a blip given juniors’ balance sheets and supportive commodity prices. Copper is trading at all-time highs (US$6.65/lb) and the GDXJ is back around the 2011-12 cycle peak, when exploration spend topped US$20.0bn. This is +65% above CY25 spend (US$12.4bn) and over +125% higher in real terms. On forecasts, we cut FY27 Life Sciences revenue by -6% on FX, and move Commodities higher by +3%, which is earnings-neutral. Our TP rises to $27.20 (from $25.30) on valuation roll-forward. ALQ reports on Monday 18/05.

1Q26 updates from key offshore peers have shown broadly positive read-throughs for BRG, despite an ongoing challenging consumer and macro backdrop. We consider small domestic appliance peers with a premiumisation focus (DLG / KitchenAid), innovation-led NPD (SN), high Coffee exposure (DLG) and ongoing geographic expansion (all) as holding strong relevance for BRG. Sales momentum across these select peers in 1Q26 (DLG +6.6%; Ninja brand +9.1%; KitchenAid +10%) appears broadly positive and supportive of our view for ongoing outperformance from BRG. BUY maintained.

EBR has secured a purchasing agreement with HCA Healthcare, one of the largest healthcare systems in the US, representing an important commercial milestone. We believe the agreement not only should support more efficient procurement and contracting processes, building on US commercial momentum following strong 1Q implant growth, but also reinforce management’s recent commentary around increasing engagement with large IDNs and GPOs, which we view as critical to scaling adoption over time. We continue to view EBR favourably given growing physician enthusiasm, expanding reimbursement support, increasing repeat utilisation and emerging evidence of institutional validation. We make no changes to CY26-28 forecasts or A$2.47 DCF-based valuation. BUY.

3Q26 delivered a strong operational period, with core testing revenue doubling YoY and volumes tracking to FY26 guidance of 24k+ tests. Record Microbiome Explorer volumes in both AUS and the UK, accelerating clinic account momentum and a meaningful improvement in cash outflows were the highlights. Despite the strong Explorer trajectory, MetaPanel is a slower burn than expected so happy take a more conservative stance on the ramp here. Likewise, headed into a tougher discretionary spending environment, we re-map expectations to what we view as base-case growth scenarios while rolling through higher risk-free rates and remove Therapeutics from our SOTP. We retain our Speculative Buy, but our target price reduces to A$0.15 (from A$0.29). The operational momentum is in train, the catalyst pipeline is building, and any therapeutics transaction remains a free option, but the macro backdrop warrants a more conservative hand on the dial for now. Cash remains tight but a flagged "significant corporate transaction" adds intrigue. Sounds imminent.

DNL’s 1H26 result was materially stronger than expected. After a stronger than expected 1H26, DNL would have upgraded its FY26 Explosives guidance had it not been for a stronger AUD, cost headwinds given the conflict in the Middle East and stranded costs post the sale of Phosphate Hill. We have made material revisions to our FY26 forecasts reflecting the sale of Phosphate Hill for a poor price. Moving forward, DNL is now a pure play explosives company. We have made modest upgrades to FY27/28. In its first year with no Fertilisers, DNL is trading on a fair FY27F PE of 17.9x and EV/EBITDA of 9.3x. We maintain a Hold rating with a new price target of A$3.46.

FY26 guidance was downgraded on China Albumin price pressure, US Ig channel inventory normalisation and other impacts (paused Iran sales, lower Hemgenix and and Iron sales), combined with a further cUS$5bn in flagged impairments. Importantly, issues are framed as primarily executional rather than structural, with infrastructure overbuild, organisational complexity, and weak commercial execution cited, while underlying demand and industry structure remain healthy. Encouragingly, Seqirus is performing better than expected, Ig demand remains mid-to-high single digit, and there are early signs of plasma share stabilisation. While forward earnings visibility remains limited, we believe the current valuation increasingly discounts a structurally impaired plasma franchise, which we do not believe the current industry dynamics support. We reduce FY26-28 forecasts and lower our blended DCF, PE and EV/EBITDA-based target price to A$147.59. Given CSL’s global leadership positions, structurally growing end markets and operational initiatives, we retain a BUY rating.