Ansell’s Operating Leverage Surprises but New Cost Pressures Likely to Curb Margins

We maintain our AUD 33 fair value estimate for narrow-moat Ansell following interim 2021 results. EPS grew 65% to USD 0.829, in the midrange of previous guidance. Ansell’s full-year EPS guidance range of USD 1.60–1.70 implies a similar half, a bit better than we had expected. Accordingly, we increase our fiscal 2021 EPS forecast by 11% to USD 1.64. However, we leave our five-year EPS CAGR forecast of 8.4% unchanged, as we continue to expect pricing and volumes to normalise as supply eventually catches up with demand. Shares screen as overvalued at current levels, reflecting the market’s more optimistic view of long-term sustainable earnings-growth rates.