C-Rad: Yet another strong quarter in the books - ABG
This is a third party research report and does not necessarily reflect our views or values
Service standing out in Q2 EBIT beat of 12%
Q2 was characterized by a return to normalcy with organic growth of 51%, compared to a quarter severely impacted by the pandemic. Net sales of SEK 61m were in line with expectations, but we note the continued strength in EMEA and the rebound in North America, where the Elekta partnership has started to gain traction. Organic order growth of 24% was slightly below our expectations driven by APAC, where the pandemic has caused prolonged purchasing decisions. The order book was SEK 352m (25% y-o-y) at the end of the quarter, and with Q2’21 LTM order intake 23% above 2019 levels (FX adj.) we believe this shows the strong momentum C-RAD is currently enjoying. Orders have been helped by the life cycle business, which in the quarter also stood out on sales with 20% sequential growth (51% y-o-y). The EBIT margin at 9.9% (ABGSCe 8.9%) drove a 12% EBIT beat, with the gross margin at 62.6% (ABGSCe 60%) due to better product mix.
Taking market share in a high-growth market
We believe C-RADs past four quarters with organic order growth in the range of 17-49% are evidence of SGRT’s progress to become the standard of care. The implementation is driven by the shift towards advanced high dose RT treatments, where the importance of an accurate patient position is magnified. This trend has, according to the company, accelerated because of the pandemic, which should continue to drive broader adoption of SGRT. However, we also find that the recent high growth implies that C-RAD is outgrowing the market and taking market share from its competitors.
’21-23e EV/Sales of 7-5x, new fair value range of SEK 44-94
On the back of the report, we have increased our ’21-23e EBIT by 7-4%, driven by higher service revenue and a higher gross margin. We have made minor revisions to our DCF scenarios, which yield a new fair value of SEK 44-94 per share. C-RAD is currently trading at ’21-23e EV/Sales of 7-5x for our forecasted ’20-25e sales CAGR of 16%.
Q2 was characterized by a return to normalcy with organic growth of 51%, compared to a quarter severely impacted by the pandemic. Net sales of SEK 61m were in line with expectations, but we note the continued strength in EMEA and the rebound in North America, where the Elekta partnership has started to gain traction. Organic order growth of 24% was slightly below our expectations driven by APAC, where the pandemic has caused prolonged purchasing decisions. The order book was SEK 352m (25% y-o-y) at the end of the quarter, and with Q2’21 LTM order intake 23% above 2019 levels (FX adj.) we believe this shows the strong momentum C-RAD is currently enjoying. Orders have been helped by the life cycle business, which in the quarter also stood out on sales with 20% sequential growth (51% y-o-y). The EBIT margin at 9.9% (ABGSCe 8.9%) drove a 12% EBIT beat, with the gross margin at 62.6% (ABGSCe 60%) due to better product mix.
Taking market share in a high-growth market
We believe C-RADs past four quarters with organic order growth in the range of 17-49% are evidence of SGRT’s progress to become the standard of care. The implementation is driven by the shift towards advanced high dose RT treatments, where the importance of an accurate patient position is magnified. This trend has, according to the company, accelerated because of the pandemic, which should continue to drive broader adoption of SGRT. However, we also find that the recent high growth implies that C-RAD is outgrowing the market and taking market share from its competitors.
’21-23e EV/Sales of 7-5x, new fair value range of SEK 44-94
On the back of the report, we have increased our ’21-23e EBIT by 7-4%, driven by higher service revenue and a higher gross margin. We have made minor revisions to our DCF scenarios, which yield a new fair value of SEK 44-94 per share. C-RAD is currently trading at ’21-23e EV/Sales of 7-5x for our forecasted ’20-25e sales CAGR of 16%.