Össur
Össur - Focus on margin improvements in Q1’21 (ABG Sundal Collier)

2021-04-20 17:28
ABGSCe Q1 organic sales growth of 3.3% (cons. 3.5%)
Cons. expects 1.3pp y-o-y gross margin improvement
Long-term fundamentals remain solid
Q1 sales growth expected to be solid, in back-end loaded FY
With sales around index 90-100 in Q4’20 (Prosthetics was even slightly above index 100), and with the COVID-19 situation having improved during Q1 (particularly in the US), we expect to see solid sales growth for Q1. ABGSCe calls for organic sales growth of 3.3% (company-collected cons. 3.5%) driven by prosthetics sales, as the B&S segment will likely continue to see a negative impact from lower levels of elective surgeries and the divestment of Gibaud. Overall, we expect Q1 sales to be strong, and to provide an indication of how the recovery process is coming along in the various markets, as well as pent-up demand. These factors could represent support for the higher end of Ossur’s current FY’21 org. sales growth guidance at 10-15% (ABGSCe 13.6%, cons. 13%).

Better product mix and increased production utilisation
Going into Q1, we will be very focused on overall margin improvements. Given that Ossur has focused on scaling operational utilisation to fit current demand levels, as well as the divestment of Gibaud (which had a negative gross margin impact on group levels of 1.3pp in 2019) and a stronger expected product mix (due to slower sales recovery for the B&S segment), we expect to see a Q1’21 gross margin of 64.6% (cons. 63.7%). This corresponds to a y-o-y improvement of 2.4pp (cons. 1.3pp).

Fair value range reiterated at DKK 35-68
Going into Q1, we see no need for significant estimate changes. Our assumption of FY’21 being back-end loaded (supported by Hanger Inc. during its quarterly presentation in March) still stands, and with a continued strong long-term outlook, we reiterate our fair value range of DKK 35-68.


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