Ansell Limited

ANN Details

FY21 Financial Performance- Ansell Limited (ASX: ANN) engages in designing, developing, and manufacturing protection solutions. It operates in the healthcare and industrial segment in the Asia Pacific, Europe, the Middle East, Africa, Latin America, the Caribbean, and North America.

• Strong Revenue Growth- The company has recorded a 25.6% year on year revenue growth to US$2,026.9 million in FY21, compared to US$1,613.7 million on a pcp basis, driven by strong volume growth in surgical and life sciences.
• Improved Total Current Asset- The company has reported a total current asset of US$1,166.9 million as of 30 June 2021 vs US$961 million as of 30 June 2020, reflected due to a rise in inventories, which amounted to US$611.2 million at the end of 30 June 2021.
• Increased Bottom line Growth- The company has incurred an increased net profit after tax by 57.5% to US$246.7 million in FY21 against US$156.6 million in FY20.
• Liquidity Position- At the end of the period, the cash position stood at US$240.2 million as of 30 June 2021 vs US$408.9 million as of 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Supply Chain Disruption- The company has faced disruption in its global supply chain, due to the COVID-19 pandemic, and if the uncertainty continues, it might impact its operation.
• Financial Risk- The company might face challenges investing in manufacturing, operations, and meeting its financial obligations.

Outlook:

• The company focuses on new product development and further, strengthen the manufacturing capabilities to support the increasing demand for safety solutions.
• The management expects an increasing demand for Mechanical, Surgical, Life Sciences products and internally manufactured Single Use gloves, which might drive earnings growth in the near future.
• The company is looking forward to expanding its international footprint. Moreover, it focuses on the strategic and disciplined acquisition, which might drive growth going forward.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of ANN is currently trading below its average 52-weeks' levels of $31.020-$44.070. The stock of ANN gave a negative return of ~6.83% in the past one month and a negative return of ~14.04% in the past nine months. The stock has been valued using the Price/Earnings multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ median P/E multiple, considering the global supply disruption due to travel restriction, expected increase in freight costs and shipping delays, the estimated adverse impact on EPS in FY22, liquidity risk, etc. For the purpose of valuation, peers such as Sonic Healthcare Ltd (ASX: SHL), Ramsay Health Care Ltd (ASX: RHC), Resmed Inc (ASX: RMD) and others have been considered. Considering the current trading levels, indicative upside in valuation, strategic expansion, decent bottom-line growth, increasing demand for healthcare products, optimistic outlook, we recommend a ‘Buy' rating on the stock at the current market price of $31.51, down by ~1.47% as of 29 October 2021.

ANN Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined:  

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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