Ord Minnett has raised its recommendation on ResMed to Accumulate from Hold and its target price to $9.50 from $8.25, seeing the sleep apnea machine and mask producer as on the cusp of a return to double-digit growth following the successful launch of its new masks.
This new masks should deliver a solid benefit to product mix, supporting a rise in gross margins after the contraction associated with the group’s highly successful, but lower-margin, device range.
The product cycle in masks is set to boost both the top and bottom lines. In light of positive industry feedback and a solid lift in US sales (despite the short time since launch) we have our raised our sales forecasts.
Our confidence reflects ResMed’s impressive track record with new product development which has allowed it to become the leading player in the sleep sector. We expect at least 12 months of elevated mask sales.
Our confidence in the outlook is supported by US political changes which signal a more benign funding environment which limits pressure on prices.