London, UK, 4 October 2022

Ergomed (ERGO): Poised for a strong FY22

Ergomed released full H122 accounts following its July 2022 trading update, the key takeaway of which was the sustained strong momentum across both business segments despite the underlying biotech market softness. The 24.8% y-o-y revenue growth was supported by geographical expansion, forex tailwinds and a £4m contribution from the ADAMAS acquisition. This in turn translated into robust margins (albeit slightly lower than H121), which should benefit further from the consolidation of the higher-margin ADAMAS business. The order book continued to be strong (24.9% y-o-y growth) indicating a solid sales pipeline for the coming quarters. With a £12m cash balance and £80m in undrawn debt facilities, the company remains well capitalised to fund future growth. Our valuation goes up slightly to £783m or 1,568p/share on a higher share count (versus £777m and 1,577p/share previously).

We keep our estimates broadly unchanged following the H122 results although our valuation goes up marginally to £783m (from £777m) from rolling forward our model (offset by a lower cash balance). Per share valuation goes down slightly to 1,564p/share (from 1,577p/share) due to higher shares outstanding. Our valuation implies an FY22e EV/EBITDA multiple of 27.3x. Ergomed trades at a premium on FY22e EV/EBITDA (consensus) of 19.6x versus the peer average of 13.4x.

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