Elos Medtech - Time to shine after Q1

Worse sales, better margins ‘21e-‘22e EBIT down 2-1% 14x ‘21e EV/EBIT on 20% EBIT CAGR ’20-‘23e New lockdowns led to soft sales, but margins clearly better Sales were on the soft side at SEK 155, growing 3% organically but 12% below our expectation. It is worth noting that the severe lockdowns in December were not accounted for in our estimates, so Elos’ Q4 performance was relatively strong, all things considered. Naturally, all segments were affected by the pandemic, and we estimate that overall patient traffic was down c. 20% on average in Q4, despite indications of a return to normal levels in October.

What stood out as impressive was the performance of Dental, which grew by 15% y-o-y, driven by 49% growth in proprietary products (mainly Elos Accurate and its popular torque wrench). Notably, Elos Medtech reported EBIT of SEK 19m for a tremendous EBIT margin of 12. 2% (8.

9%); in absolute terms, however, this was still SEK 1m below ABGSCe at SEK 20m. Headwinds in Q1 due to low elective surgical activity The increasing spread of COVID-19 has led to further restrictions, hampering elective care activity. We estimate that patient volumes are currently at c.

80%, with more extensive procedures (requiring more material) being prioritised. This will obviously take its toll on Q1’21 sales, but we expect growth of c. 2% despite COVID-19, primarily supported by momentum for proprietary products and robotic surgery contracts entering into the numbers.

Overall, we expect Q1’21e EBIT of SEK 18m for a margin of 11. 4%. After that, the clouds should clear.

We expect continued solid momentum in ‘21e for Dental and Orthopedics, which we see growing by c. 21% and 52%, respectively, through the recovery of end-markets in Q2 and new contracts. We forecast FY’21 growth of c.

27% with EBIT margins of 11. 6%, implying 34% EBIT growth. Trading below historical levels on attractive outlook The share is up c.

7% LTM, having shaken off pandemic-related concerns by delivering a ste.