Össur - Estimated to reach midpoint of FY’20 guidance

Q4e sales of USD 168m, EBIT of USD 25m Increased likelihood of FY’21 sales rebound Report due 2 February Q4’20 estimates We estimate sales of USD 168m (vs. company-collected consensus of 172m) in Q4’20, based on a Q4’20 organic growth rate of -2.2% (cons. -2.1%), corresponding to a H2’20 organic growth rate of -3.9% (cons. -3.8%, guidance of 0% to -8%).

We furthermore expect a gross margin of 62.9%, in line with consensus and similar to Q4’19. This is based on the company’s continued commitment to maintaining profitability through right-sizing operations to mitigate the impact of COVID-19. Forecast changes & outlook Going into FY’21, we acknowledge that the pandemic will continue to be a headwind in key regions (Europe and the US), particularly in Q1.

That said, certain APAC markets are starting to positively contribute to growth (APAC accounted for 8% of group revenue in 2019). We are also increasingly optimistic regarding the prospect of a sales rebound due to our CEO call in December, where CEO Jon Sigurdsson stated that markets had adapted better to the second round of European lockdowns than they did in March. Another factor is that the US Center for Disease Control has listed O&P clinicians as frontline workers in its guidelines, meaning they will likely be prioritised to receive the COVID-19 vaccine, enabling a return to a more stable workflow.

All in all, we forecast a slightly higher-than-anticipated (ABGSCe) FY’21 sales rebound, with an organic growth rate of 13.6%; note that this remains somewhat lower than company-collected census expectations of 13.9%. We expect FY’21 EBITDA margin guidance of +22% (ABGSCe 22.3% vs. cons.

23%). Fair value range increased to DKK 35-67 (34-66) Based on our scenario valuation, our fair value range has increased to DKK 35-67 (34-66). This is predominantly based on higher estimates for FY’20 profitability.

The share is currently trading at a consensus-based NTM P/E of 39x vs. its two-year avg. of 36x..