Doro
Doro - Monetising the telecare market (ABG Sundal Collier)
2020-01-07 06:56
Well-positioned to benefit from the ageing population
We believe Products sales are set to stabilise
Fair value range of SEK 37-92 per share
Positioned to capitalise on the growing telecare marketOur analysis focuses on Doro's operations, telecare market trends and the competitive landscape, with special attention given the firm's Services segment. Our findings suggest that Doro is well-positioned to capitalise on a rapidly growing telecare market driven largely by the ageing population. While elderly people wish to live at home for as long as possible, municipalities and other organisations need to optimise resource allocation; this drives demand for digital solutions like telecare. According to market research firm Berg Insight, the European telecare market will be worth EUR 4.4bn in 2024 (10% CAGR for 2018-2024).
Gradually improved sales mix bodes well for higher margins
Doro has recently reported double-digit Services growth, which we expect will continue. We forecast ’18-‘22e sales CAGR of 20% on the back of a strong position in a growing market. In terms of Products (feature phones), we see the last two years’ weak development (-6% organic growth) as stemming from a sluggish market. However, we think that Doro’s leading position in the feature phone market will offset this weakness on Doro winning market share while smaller competitors are pushed out of the market. We forecast flat growth in Products for ’18-’22e. We also note that the current CEO was Head of Doro Care as late as 2017. This shift, i.e. a higher share of Services sales, also bodes well for higher margins; we estimate that Doro could reach an EBIT margin of 7.2% in 2022 (vs. 6.4% in 2018). Our estimate changes mostly reflect recent FX movements.
9x ’20e EV/EBIT, slightly above historical NTM multiples
Doro is trading at 9x ‘20e EV/EBIT, slightly above historical levels. That said, we argue that today’s Doro, with Services now accounting for 20% of sales (vs. 10% in ’17), has a substantially improved
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