COVID-19 impact likely to continue

Gibaud divestment successfully finalized

DCF valuation range DKK 33-65 DKK per share

Improved Q3’20 sales vs. Q2’20
Due to COVID-19, the company has been updating the market on the continued progress in terms of sales recovery. We therefore know that sales from July to mid-September have been ~90-100% of those in 2019, well above Q2’20 which saw an organic sales decline of ~26%. For Q3’20, we expect sales to be down 7.6% organically (vs. company-collected cons of ~7.4%) and an EBITDA of USD 26m (vs. cons. of USD 29m). Due to the uptake in COVID-19 cases across Europe and more restrictions implemented, we expect the company to narrow the guidance range towards the lower end. Current guidance is 0 to -8% organic sales growth in H2’20, ABGSCe is at -4.9% for H2’20 and cons is about -3.6%.

Continued strong focus on long-term strategy
The divestment of Gibaud SAS in France was successfully completed on 30 September 2020. We see this as a sound strategic decision to divest this margin-dilutive B&S business. It further supports our belief that the company is increasingly focusing on the higher-margin prosthetics segment (in line with the long-term strategy), which we now expect will account for 58% of revenues in 2020e and 62% in 2021e when the full effect of the Gibaud divestment is visible (vs. 55% in 2019). We have furthermore adjusted our estimates to account for the now completed Gibaud divestment, seeing roughly a 6% top-line decline while having less of an impact on the bottom line as it was margin-diluting for the group.

Scenario valuation indicate fair value range of DKK 33-65
We have constructed three DCF scenarios based on different COVID-19 impacts, expected M&A activity level, margin improvements and long-term sales success of new products. Based on these scenario valuations, we derive a fair value range of DKK 33-65.

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