OssDsign: Good things take time (to produce) - ABG

Softer Q1 on long lead-times dampening sales
High surgical activity bodes well for rest of ‘22e
Fair value range of SEK 8-21 /share unchanged

Lead times should dampen Q1 performance
We think that there is a high likelihood that the upswing we saw at the end of February in surgical activity does not show in the Q1 numbers. We estimate that Cranial PSI has a lead time from order to delivery of about six weeks. The dynamics of COVID-related end-of-quarter weakness in Q4 that lasted to mid-February should result in relative weakness in Q1 given the long lead time. Furthermore, we expect that surgeons need decent visibility of access to the operating theater for them to order Cranial PSI. During Q1, that access seems to have been volatile. Procedures have been put on hold and then with quick notice returned. Hence, surgeons should have had to switch to alternatives with shorter lead times. Hence, we cut expectations for Q1, and to some extent, also Q2 as mid-Q1 weakness could spill over. However, we expect these headwinds to impact OssDsign only temporarily and forecast a normalisation during Q2, with ~32% sequential growth. Electives have recovered at an impressive rate, according to our tracker, and are now back to solid levels, with a high surgical backlog to support high growth through the rest of ‘22e.

Cut to ‘22e sales of 10%, ’24e unchanged
We cut ‘22e sales by 10% mostly based on the weaker Q1’22e explained above. Our assumption for ‘24e sales of SEK 215m is unchanged. Assumptions for costs are relatively unchanged.

Unchanged value range at SEK 8-21 per share
We leave our fair value range unchanged at SEK 8-21 as the long-term estimates, which make up the bulk of the valuation in our DCF, are unchanged. The share is now down 40% YTD and has traded comparably weak to the broader Medtech sector, which is down 32% on average. Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ossdsign/Equity-research/2022/5/ossdsign---good-things-take-time-to-produce/