Elos Medtech - Record-high margins
EBIT 37% better than ABGSCe EBIT up 11-4% ’21e-’23e 13x ’22e EV/EBIT with 22% EBIT CAGR ’20-’23e 14% organic growth and EBIT up 110% y-o-y Elos Medtech delivered a stellar quarter, driven largely by own products and robotic surgery. Sales was SEK 171m, up 8% y-o-y (+14% organically) and 6% better than ABGSCe. All segments contributed to the beat, but Orthopedics and Dental came in 9% and 6% better than we expected, respectively. The most impressive number in this report was the Group margin of 14.
6% (9. 4%), which marks the third margin record in a row. This resulted in EBIT growth of 110% y-o-y, and was largely driven by Dental having margins of 18% (11%).
Costs were kept under control while own products with higher gross margins had a solid drop through. Dental margins seem to be back to normal levels, as indicated by industry sources. Note that there were no non-recurring effects boosting margins this quarter.
EBIT growth of 50% in 2021 We lift EBIT by 11-4% on the significant Q1 beat and our increased sales and margin assumptions. Elective surgery and dental patient volumes gradually recovered during Q1, and we expect the momentum into Q2 to be healthy. Hence, we expect Dental and Orthopedics to grow by 24% and 55% in FY’21, respectively.
The volume increase should result in a solid drop through, expanding ’21e EBIT margins by 160bp y-o-y to 12. 6%, resulting in Group EBIT growth of 50%. However, we see one cloud in an otherwise blue sky: surging raw materials prices.
We are uncertain to what extent Elos Medtech will be able to pass on increasing metal and plastic costs, and view it as a margin risk in the coming quarters. Up 125% LTM, but limited margin expansion The share is up c. 125% LTM, having shaken off pandemic-related concerns by delivering a stellar 2020 despite significant headwinds.
Looking into ’22e, Elos Medtech is trading at 13x EV/EBIT (compared with 18x NTM at the end of ’19), while offering a 22% ’20-’23e EBIT CAGR.
