Elekta

Note: This is a daily stock update and the information stands true as of 28/08/24, 09:00 CEST.

Company Update:

Elekta reported better-than-expected Q1 FY2024-25 (April-end) results with sales 4.5% ahead of the street’s expectations, but adjusted EBIT beat of 38%.

Sales were SEK 3.8bn (+1% in constant currency terms), driven by healthy growth in Service (+5%; c.50% of sales), which was almost offset by weaker Solutions (-3%; c.50% of sales), due to lower sales in Europe and China.

More importantly, even gross order intake grew by 10% in Q1 despite sales still being lacklustre in China.

On the other hand, profitability remained under pressure – the adjusted operating profit margin was down 380bp to 7.4%, due to higher operating expenses.

For FY2024-25, the management has reiterated its outlook with sales expected to grow by mid-single digit rate. Meanwhile, EBIT margin improvements are still being targeted. Notably, beyond the current fiscal year, the management aims an EBIT margin of at least 14% vs. 11.3% in the previous year.

Expert Opinion:

Elekta has strong positions on radiotherapy markets and radio surgery. The miss in Q4 really scared the market and the current slump in China is a drag on the share price. However, in my opinion the underlying quality of the company is unchanged. With PE of 14.6x (25 April) for valuation is really attractive and I expect that rerating will occur. This is a strong buy in my opinion.

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