Steady Decline, page-16

HiMsim878

Morgans

RESMED INC - 2Q mixed- the wheels haven't fallen off

11:06am 28th January 2019

Recommendation: Add

2Q adjusted operating income and net profit came in ahead of expectations, but sales were softer than expected, impacted by lower device uptake in France and Japan as upgrades rolled off. Importantly, patient growth outside these geographies is 'excellent' leading to market share gains, with stable pricing, expanding margins and improving underlying profit. While acknowledging moderating near term ex-US device growth, a handful of acquisitions adding to costs and requiring time to bed down, and Brightree base business slowing a tad, we continue to believe the company remains well positioned and view the sell-off as shortsighted and overdone. We modestly adjust our FY19-21 forecasts, with our DCF/SOTP valuation declining to A$16.31. We maintain an Add rating.