CZM is finally(?) back on investor radars

As Carl Zeiss Meditec has been under immense pressure since late-2021, the sentiment for this China-exposed MedTech and the sector in general may now be finally improving. This can be attributed to a softer-than-expected impact from China’s corruption clampdown on its Healthcare sector. Overall, while there are still some near-term risks w.r.t VBP and consumables destocking, there is no doubt that CZM’s sustained innovation prowess and/or a comprehensive portfolio makes it an attractive MedTech

Mixed Q3; profitability now targeted at the lower-end of guidance

CZM reported mixed Q3 results. Despite some near-term headwinds, CZM managed to report healthy double-digit sales growth. While profitability witnessed sequential improvements, it is now guided at the lower-end of the previous guidance. On the other hand, the rebound in Chinese procedure volume supports a healthy growth outlook for the ongoing summer season. Overall, with intact innovation prowess, gradual supply-chain improvements and promising market dynamics, our positive recommendation is re

Reassuring conversation with Investor Relations

Some promising takeaways from our recent discussion with CZM’s IR. Despite a weaker Chinese economy, the firm is witnessing a strong rebound in refractive procedures over the past two months. Importantly, the rebound in Chinese procedure volume supports the strong sales growth outlook for the upcoming summer season. Also, CZM’s FY 23/24 P/E is close to FY 16/17 levels and, considering CZM’s enviable market position along with benefits associated with entry in the US markets, we believe the stock

Mixed Q2, but promising operational dynamics

CZM released a mixed set of Q2 results. Despite the challenging macro-economic environment and supply-chain constraints, the firm managed to report double-digit sales growth across all segments. While operating profitability remained under pressure, there was a sequential recovery vs. the Q1. More importantly, given the recovery in consumables (high margin business) at the end of the Q2 and the upcoming peak summer season and supply-chain improvements, further sales growth and profitability enha

Weak Q2 margins + profitability guidance moderated

CZM reported mixed Q2 23 preliminary numbers. Despite sales continuing to grow at a healthy rate, the markets were spooked by weaker profitability (like Q1), which also resulted in a margin guidance downgrade. Nevertheless, the Chinese re-opening (a key market for CZM), the peak surgery season opportunities and a gradual improvement in the supply chain are all resulting in better order book conversion and the H2 is expected to be stronger. Overall, CZM remains a quality bet and, hence, our posit

Mixed Q1 results; outlook maintained

CZM reported mixed Q1 results. While, despite market challenges, both segments reported healthy top-line growth, operating profitability came under pressure. Meanwhile, 2022/23 guidance was unchanged. Now with the re-opening of China (key market for CZM) and considering the peak season for surgery in early 2023, the current quarter is expected to be stronger. Moreover, considering CZM’s sustained innovation focus/prowess and a comprehensive portfolio, our positive recommendation is reiterated.

Strong end to 2021/22; an attractive MedTech, despite some (guided) headwinds

Despite the macro-economic headwinds and COVID-19 lockdowns in China, CZM reported strong Q4 21/22 results, led by resilient performances from both the segments. More importantly, the robust order intake growth was all the more promising. Despite the encouraging take-ways, the markets were spooked by a weak outlook for Q1, although the shares have gradually recovered. Overall, with intact innovation prowess and news of the re-opening of the Chinese economy (biggest market) gathering momentum, CZ

Healthy Q3, despite various headwinds

Despite Chinese lockdowns and supply-chain limitations, CZM managed to report healthy Q3 21/22 results. Both segments reported healthy growth, whereas the order intake was all the more impressive. Considering the promising dynamics, management has improved its guidance. While the near-term performance remains vulnerable to China, the firm continues to capitalise on the respective market opportunities via its innovative offerings. Our recommendation is maintained.

Reasonably good Q2, despite underlying challenges/risks

Despite the supply-chain challenges, CZM reported a reasonably good set of Q2 21/22 results. Both segments reported double-digit growth and order intake was impressive. Unlike most of the MedTech peers, even margin improvements were reported. While the management maintained its FY 21/22 guidance, the near-term is likely to be impacted/driven by China and supply-chain uncertainties. Overall, with niche and high-demand offerings, CZM remains a quality MedTech proposition and, hence, is work a look

2022 starts on a positive note

CZM reported healthy Q1 21/22 results, with double-digit growth across both segments. Importantly, order intake was even stronger, reflecting normalising markets. While margins came under pressure (as expected) due to higher selling and R&D expenses, management maintained its FY21/22 outlook, despite aggravating supply-chain concerns. Overall, CZM remains well-positioned to leverage demand recovery/growth in focus markets and the sell-off in recent months should be capitalised as an entry opport

Healthy growth across segments, but caution maintained

In Q4, CZM reported double-digit growth across segments and regions. For FY 21/22, management expects sales growth to remain in line with the industry’s growth rate, and margins are expected to normalise. While the firm remains a beneficiary of healthy recovery/momentum and an increasing share of recurring sales, there are some near-term challenges like supply constraints and re-emerging COVID-19 risks, which cannot be ignored. Moreover, given CZM’s still expensive valuation, our recommendation

Guidance upgrade driven by robust demand for high-margin consumables

Benefiting from higher demand for consumables and a robust recovery in the equipment business, CZM reported better-than-expected sales growth in Q3. The profitability beat was also encouraging thanks to the favourable product mix and lower selling expenses. Given the sharp bounce-back in elective procedures, demand for high-margin consumables is likely to remain high and thus the full-year targets have been raised. However, the spread of the Delta variant is a key risk, along with rising competi

High-margin consumables lead the momentum in Q3

Sales momentum accelerated significantly in Q3 20/21 led by the increased demand for consumables. Interestingly, elective procedures have bounced back sharply, given the faster deployment of vaccines, and thus demand for high-margin consumables used in refractive and cataract surgeries is on the rise. Benefiting from an improving product mix and a lower cost base, profitability also developed favourably during the quarter. Given the positive business development, FY20/21 sales and profitability

Momentum accelerates significantly in Q2

Sales momentum accelerated in Q2, thanks to the strong demand for high-margin consumables and positive growth across regions, with China being the key contributor. Given the faster deployment of vaccines, pandemic headwinds seem to be fading away and, as the demand for elective surgeries is likely to remain high, management is optimistic for FY20/21. However, increasing competition in key markets is a key risk.

Solid recovery in Q2 20/21

CZM pre-released a strong set of Q2 20/21 results. Sales outperformance was driven by the faster-than-expected ramp-up of ‘elective’ ophthalmic procedures and the profitability beat was led by a favourable product mix and lower selling expenses amidst the pandemic. Management anticipates an ongoing normalisation of business during the rest of the year and has shared an encouraging guidance for FY20/21.

Warpaint London+ (W7L, House Stock at 375p) - Trading ahead of expectations - +10% upgrade implied

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

Hybridan Small Cap Feast - 15 April 24

15th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: Change of Market: TheWorks (WRKS.L) a multi-channel value retailers of books, arts and crafts, stationery, toys and games, offering customers a differentiated propositio

Morning Note – 9 April 2024

Morning Note – 8 April 2024

Avon Protection - Unmasking its growth potential

Avon Protection’s capital markets day highlighted its continued focus on medium-term margin expansion (targeting operating margin of 14–16%), concentrating on its core business of respirators and head protection. The unwinding of the armour business, alongside the consolidation of Team Wendy (acquired in H220) should enable Avon to benefit from rising global defence spending. Its strong relationship with the US DoD, and organic growth opportunities with recurring revenue from necessary product r

Cambridge Nutritional Sciences - H1 2024 interims: Executing a newly focussed st

Cambridge Nutritional Sciences (CNS) has published its H1 2024 results to end September 2023. Group revenues grew 44% to £4.9m and gross profits increased by 63% to £3.1m, with the company benefitting from newfound operational efficiencies. With its now streamlined strategy focussing on the core Health & Nutrition business and the initial signs of an encouraging uptick in sales momentum, we believe the company is well positioned for growth that will help create future value for shareholders. We

Venture Life Group - Strong organic growth; focus on EBITDA

Venture Life has reported FY23 results to December 2023, following the February trading update. Revenues grew 17% in the year to £51.4m (our est. £50.7m) and adjusted EBITDA was £11.6m (our est. £11.6m). Cash conversion was 85%, generating £9.8m of cash from operations. Cash generation and no M&A in 2023 allowed the company to de-lever, closing FY23 with net debt to adjusted EBITDA at 1.3x. Management have focused on growth with three therapy areas generating double-digit revenue growth and onli

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Morning Note – 22 March 2024

The Hardman & Co Monthly: March 2024

Feature article: Streamed content takes over…after the Great Correction of 2022 Streaming is a disruptive, content-led, subscription-based technology. Challenging all video distribution business models, it opens up global opportunities for a growing variety of content, including gaming and sport. The Great Correction of 2022 saw the share prices of streamers plunge after market leader Netflix reported slowing subscriber growth. The slowdown in growth of subscribers led investors to refocus on

Diaceutics | FY23 update – 22% revenue growth, £16.7m YE cash

Diaceutics has released a trading statement for the year to December 2023 guiding to revenue growth of 22% YoY to £23.7m, up 19% on a constant currency basis. The order book jumped 57% to £26.6m, of which c£12.3m is expected to be realised in FY24, and which currently stands at £30.8m. The proportion of recurring revenue continues to increase and is now over 50% (FY22 35%). Cash at YE23 stood at £16.7m, indicating a near halving of the rate of cash burn in 2H23 compared to 1H23. We adjust our FY

Belluscura Trading Update

Belluscura has released a Trading Update stating that due to the delay in securing funding and Chinese NMPA approval, sales and manufacturing have been delayed by at least four months and it now expects EBITDA breakeven in Q3 and to turn cashflow positive in Q1 2025.

Zoetis Inc.: Launch Of CircoMatch & Other Drivers, Financial Forecasts, DCF & Comparables Valuation, ESG & Other Risks (02/23)

Zoetis delivered a decent set of results for the last quarter of 2022 meeting analyst expectations as well as the high end of its management guidance. Despite the economic challenges, ongoing pandemic recovery, and the political unpredictability brought on by the war in Ukraine, they delivered operational growth for the year in each of their top 13 markets. The company's unique companion animal portfolio drove its 8% operational revenue increase for the year, growing 14% operationally. In compar

Morning Note – 12 February 2024