Resmed's first quarter was above Morgans expectations, underpinned by high single digit revenue growth and expanding gross margins, with lower operating expenses driving ongoing operating leverage.
The broker highlights ventilators continue to benefit from covid-19 demand, albeit slowing, driving an around 6% sales uplift and helping to overcome softness in the sleep business and SaaS.
A faster than expected recovery in patient diagnosis, ongoing strong masks resupply, and benign pricing environment, point to solid profitable growth, says the analyst- especially when coupled with pandemic-induced acceleration of macro trends.
Management continues to expect a 'U' shaped recovery through FY21, with covid-19 ventilator demand waning and sleep device headwinds, notes the broker.
Morgans raises FY21-23 earnings estimates and increases the target to $30.99 from $29.33.
The Add rating is unchanged
Sector: Health Care Equipment & Services.
Target price is $30.99.Current Price is $27.47. Difference: $3.52 - (brackets indicate current price is over target). If RMD meets the Morgans target it will return approximately 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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