Analyst Note| Shane Ponraj, CFA |
Narrow-moat ResMed’s first-quarter fiscal 2023 underlying EBIT rose a moderate 4% to USD 291 million on the previous corresponding period, or pcp. While its redesigned AirSense 10 Card-to-Cloud device drove 18% U.S. revenue growth on pcp, sales in international markets fell 16% on pcp, or 6% in constant currency. This was largely due to major markets such as France and Japan having a strong preference for 100% cloud-connectable devices given its digital health reimbursement models. Here, ResMed is still facing ongoing supply constraints in accessing sufficient device components, which is limiting new patient starts and negatively affecting mask sales as well as devices. Although we think this is simply creating pent-up demand and remain positive on supply constraints eventually easing, we reduce our fair value by 4% to USD 245 per share, or AUD 38 per CDI at current exchange rates, largely driven by the weaker euro relative to the U.S. dollar. We forecast a five-year 11% revenue CAGR, down from 12% prior, and an unchanged midcycle 35% EBIT margin.