ResMed Market Share Growth Continues as Expected, Upgrade FVE to USD 114 and AUD 17

Narrow-moat ResMed posted a quarterly result materially in line with our expectations. We upgrade our fair value estimate to USD 114 from USD 109, and to AUD 17 from AUD 15.50, due to time value of money and a near-term increase in mask and accessories sales in the U.S. We update our exchange rate assumption to 0.67 USD/AUD from 0.70 which contributes half of the AUD gain. ResMed’s eco-system approach to retaining clients via connected devices and resupply services is paying dividends and we continue to factor the company growing share in the sleep apnea market. We forecast five-year revenue CAGR of 8.6% which is a blend of stronger U.S. growth at 9.8% and slower growth of 4.4% in other markets. We expect 10% organic growth from the Software as a Service, or SaaS, segment. This delivers group GAAP earnings growth of 10% compounded to fiscal 2024.