Carl Zeiss Meditec (1K) | Hold | Chinese competition to enter before rebound

Research evidence excerpt

Carl Zeiss Meditec (1K) | Hold | Chinese competition to enter before rebound

EBITA CAGR over Net financial debt (m) 346.1 226.5 71.8

the next three years, growth will be back-end loaded, and consensus forecasts for FCF (m) 109.7 137.4 180.9

the next three years will come down now, post results. We discuss these EPS adj. and ful. dil. 1.45 1.73 2.23

initiatives and some pros and cons in this report. Consensus EPS 1.55 1.84 2.18

Net dividend 0.26 0.36 0.51

▪While the earnings growth is underpinned by ~90% by its new self-help initiatives, FY to 30/09 09/26E 09/27E 09/28E which should somewhat derisk it, we note a low implied organic earnings growth

P/E adj and ful. dil. 17.5 14.6 11.4

expectation. Beyond this, we note that Chinese competition may enter first EV/EBITDA 9.1 7.8 6.1

before CZM is expected to enter the larger part of its margin rebound phase. EV/EBIT 14.2 11.6 8.7

Deconstructing the forecasts FCF yield 4.8% 5.9% 7.9%

Dividend yield 1.0% 1.4% 2.0%

▪We cut our earnings forecasts with this report, which implies an 8%, 11% and 3% ND(F+IFRS16)/EBITDA 1.4 0.9 0.4

adj. EPS cut for the following three years compared to the latest (pre-Q2) Vara Gearing 16.1% 10.1% 3.0%

consensus. ROIC 5.8% 6.8% 8.5%

Valuation and investment conclusion EV/IC 1.2 1.1 1.0

▪What we like: Material earnings growth expectations, supported by self-help. SectorFreseniusMostSE Pref.

Adverse earnings cuts should come to an end. Reasonable valuation after a sharp

decline.

▪What we like less: Among the largest China exposure in EU medtech, where

competition may enter next year. Moderate “organic” earnings growth Oliver Reinberg, CFA

expectations. Likely very steep margin recovery targeted in the second half of its Head+49 69of7569German6140Equity Research & Medtech Equip. & Serv.

program.