We raise EBIT by 13% for both ’21 and ‘22e and by 12% for ‘23e, mainly derived from increased margin assumptions (EBIT margins up 1.7%-1.5% ’21-‘23e). We think that the demand was improving m-o-m throughout Q2 and expect demand to continue at a high level in H2. However, we note that Dental and Orthopedic volumes have moved quite unpredictably m-o-m during H1, and that any new precautions relating to COVID-19 (infection rates has begun to accelerate again since bottoming late June) may result in a rapid decline of volumes, which is not reflected in our estimates.
Quality company with strong end-markets at 5% FCF yield
Elos Medtech is offering solid exposure to strong growth trends in Robotic Surgery, Diabetes and IVF while also growing rapidly through own Dental products (14.5% of sales in Q2’20, up 121% y-o-y). We expect it will drive a 17% sales CAGR and a 27% EBIT CAGR ’20-‘23e. Our significant positive estimate revisions bring down the valuation significantly, now at 16x ‘22e EV/EBIT and 18x ‘21e EV/EBIT.
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