London, UK, 5 October 2021

Ergomed (ERGO): US is now the biggest market in the mix

Ergomed has released its full H121 results. H121 revenue numbers were included in the trading update in July 2021, while the full accounts released last week provided details on profits. In the trading update, management also guided that FY21 adjusted EBITDA would be materially ahead of market expectations, which has since been discounted in the share price, hence last week's announcement delivered no surprises. However, the key takeaway for us was that overall operational momentum continues to be strong, including the first three months of H221 (following the already stellar performance in FY20). In H121, Ergomed has also launched its expansion into the Japanese market. We have slightly increased our valuation to £751m or 1,536p/share (from 1,445p/share).

We keep our FY21 estimates unchanged and modestly increase our EBITDA forecasts starting from 2022 based on improved margins, cost control and integration synergies. After rolling our DCF model forward, our valuation has increased slightly to £751m or 1,536p/share. This implies an EV/EBITDA multiple of 30.0x (FY21e). Ergomed trades at a modest premium on EV/EBITDA of 25.5x vs the peer average of 24.2x, but at a discount to Medpace on 31.8x. Flexing our DCF assumptions (long-term sales growth and profit margins), our bull case stands at 2,086p/share and our bear case at 1,072p/share (details in our Outlook report).  

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