Elos Medtech
Elos Medtech - EBIT margin up 350bp in 2019 (ABG Sundal Collier)
2020-02-25 07:38
Q4’19 EBIT margin up 240bp to 8.9% (ABGSCe 9.2%)
FDA approval for US marketing of Elos Accurate
Tough Q1’20e: coronavirus and challenging comps
Margins keep expanding, but growth below our estimatesElos Medtech reported a weaker than expected Q4. Sales were SEK 158m (-12% vs. ABGSCe of SEK 180m), down 6% y-o-y (-9% organic, +3% FX). The miss was partly due to lower than expected sales in Life Science, with Bruel&Kjaer (B&K) having a continued large negative impact, as well as Orthopaedics, where sales decreased by 6%. Sales were stable in Dental, which grew 6% (in line with ABGSCe). The EBIT margin came in slightly below our expectations at 8.9% (ABGSCe 9.2%), up by 240bp vs. Q4’18 (6.5%). The margin was particularly strong in Life Science at 16.3%. Overall, EBIT was SEK 14m (-14% vs. ABGSCe of SEK 16m), an increase of 28% y-o-y. EPS came in at SEK 0.94 (ABGSCe SEK 1.23).
H2’20 to mitigate some of Q1’20e difficulties
The quarter saw Elos Medtech receive FDA clearance to market its Elos Accurate products in the US, effectively doubling Elos’ addressable market in digital dentistry solutions. According to the company, sales through new distributors are expected to rise in ‘20e. Overall, the group highlights several projects that have impacted earnings, but states that these will provide a positive impact on sales by H2’20e. Other positive news included the withdrawal of the lawsuit against Onyx (Elos’ US subsidiary). On the negative side, however, the coronavirus outbreak has left a mark on the group. Elos’ Chinese site have been shut down and this will have a material impact in Q1’20e. In addition, we note difficult comps into Q1’20e, with a one-off sales in Q1’19 of SEK 13m and a continued sales loss of B&K.
Stock is currently trading at 17x ’20e EV/EBIT
The share is up more than 50% in the last 12 months, trading at 17x ’20e EV/EBIT. We see proof of improving profitability and like the long-term potential of the company, but note that there is some near-term risk in Q1’20
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