Speedy Recovery in Sleep Devices and Currency Tailwinds Boost ResMed's Fiscal 2021 Second Quarter

We increase our fair value estimate for narrow-moat ResMed by 5% to USD 145 after second-quarter fiscal 2021 results. However, we lower our AUD equivalent valuation by 3% to AUD 19 to reflect the recent appreciation of the AUD. A faster rebound in sleep device sales than we anticipated, in tandem with a time value of money adjustment, drive our valuation upgrade. While ResMed stands to benefit from structural trends in respiratory and digital health, we still expect sleep apnea diagnosis rates to remain under pressure near-term due to the pandemic--currently about 80% of pre-pandemic levels in the U.S. We anticipate adjusted EPS growth of about 7% to USD 4.67 in fiscal 2021 before accelerating to a 10% CAGR over the fiscal 2022–25 period to USD 6.78.