Recovery in Sleep Devices and Cost Management Feature in ResMed's Q1

We increase our fair value estimate for narrow-moat ResMed by 4% to USD 138/AUD 19.60 following first-quarter fiscal 2021 results. Roughly half of the upgrade stems from a moderate reduction in our cost assumptions, a third is to account for the time value of money, and the remainder is due to a sharper rebound in sleep device sales than we previously credited. While ResMed stands to benefit from structural trends in respiratory health, out-of-hospital healthcare, and digital health, we still expect sleep apnea diagnosis rates to remain under pressure near term and pandemic-related ventilator sales to trail off. We anticipate adjusted EPS of USD 4.37 in fiscal 2021, virtually flat with the prior year, and thereafter growing at an 11% compound annual growth rate to USD 6.55 by fiscal 2025.