UBS has adjusted its rating on Coloplast (CSE:) A/S, upgrading the Danish healthcare company to “neutral” from “sell.”
This revision reflects changes in market dynamics and a reassessment of risk and reward linked to the company’s operations and valuation.
Analysts at UBS cited several factors supporting the upgrade, including recalibrated expectations around competitive pressures and investments in growth areas such as wound biologics and continence care.
Previously, UBS expressed concerns about Coloplast’s ability to maintain its premium valuation amid competitive challenges in its key markets, particularly in Ostomy and Urology.
The brokerage noted that market expectations were overly optimistic regarding potential reimbursement benefits, especially in the U.S. continence market. These factors contributed to UBS’s prior “sell” rating.
However, as per the updated analysis, many of the risks highlighted earlier have either diminished or been better accounted for in the stock’s current valuation.
The market has adjusted to more conservative expectations, with the company now trading at a 40% sector premium, aligning with historical averages.
Moreover, the publication of final reimbursement rulings for Kerecis in the U.S. has removed a major overhang, adding to the reduced uncertainty.
UBS also flagged recent structural changes, including Coloplast’s disposal of its skin care portfolio, which has led to minor revenue adjustments but no material impact on earnings estimates.
Going forward, the brokerage expects Coloplast to deliver steady growth, projecting an 8% compound annual revenue growth rate from 2024 to 2028 and an 11% increase in earnings per share over the same period.
At its price target of DKK 858, the stock would trade at 33 times the estimated 2025 earnings, justifying the neutral stance.
