Elos Medtech - Feedback from ABGSC’s Investor Day

Attractive products areas for growth in place Solid recovery within elective care ahead 12x EV/EBIT ‘22e on 21% EBIT CAGR ’20-‘22e Confident message on positioning and outlook Today, we hosted Elos Medtech and CFO Ewa Linsäter at our ABGSC Investor day. Regarding current trading, we have the impression that there are still short-term uncertainties, with elective surgery volumes remaining low for Q1, and that the recovery is likely to begin in Q2. However, Ewa delivered a confident message regarding the company’s position and growth outlook. Despite lower activity in 2020, with sales declining c.

16%, it managed to improve margins 150bp (largely due to government support) and launch its leading digital dentistry product line, Elos Accurate, in the US. Additionally, significant work has been undertaken in improving its cost structure and previous investments in automation has increased the fixed share of the cost base. Naturally, it bodes well for a margin uptick when volumes return.

We expect a solid 2021 with 34% EBIT growth The restrictions imposed late Q4’20 has arguably had a larger impact in Q1’20 as a majority is still under effect. Hence, we expect a somewhat soft Q1 with growth of 2% y-o-y and EBIT of SEK 18m for a margin of 11.4%. After that, the clouds should clear.

We expect solid performance in ‘21e, primarily for Dental and Orthopedics, which we see growing by c. 21% and 52%, respectively, through the recovery of endmarkets. We forecast FY’21 organic growth of c.

27% with EBIT margins of 11.6%, implying 34% EBIT growth. Outlook better than ever, still trading below historical level We argue that COVID-19 has given a solid opportunity of entry into this otherwise non-cyclical company. Its currently trading at c.

15x NTM EBIT, with the recent share appreciation (up 60% L6M) is mostly due to solid performance warranting positive estimate revisions. Once robotic surgery contract sales enter the numbers in H1’21e, we estimate it will support 5....