London, UK, 12 August 2021

Ergomed (ERGO): Momentum continues with EBITDA upgrades

Ergomed's H121 trading update highlights that operational momentum continues to be strong following its stellar performance in FY20. The order book continues to grow at an impressive rate, up 18% from end-2020 with a strong 1.62x book-to-bill ratio for the period. We maintain our FY21 revenue forecast, in line with company guidance, which assumes no additional FX headwinds, but note that this could mean our FY22 revenue forecast is conservative. With acquisition synergies being realised faster than expected, we adjust our near-term margin assumptions, somewhat increasing our FY21/22e adjusted EBITDA forecasts. Our valuation increases to £706m or 1,445p/share from £683m or 1,400p/share.

Adjusting our near-term margin assumptions, updating for net cash and rolling our DCF model forward increases our valuation to £706m or 1,445p/share, implying an EV/EBITDA multiple of 28.4x based on our FY21 forecast. Ergomed trades at a premium EV/EBITDA of 24.5x compared to the peer average of 21.9x, but at a discount to Medpace on 28.5x. In our recent outlook note, we provided bull and bear scenarios from flexing our DCF assumptions (long-term sales growth and profit margins). Implementing these near-term adjustments results in a bull case of 2,005p/share and a bear case of 1,032p/share. 

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