RBC Capital upgrades Convatec to ‘outperform’, hikes price target

The bank said Wound Care execution could drive more than 5% upside to consensus revenue forecasts in 2027.

"ConvaTec is showing clear execution in Wound Care, which we estimate will contribute nearly half of group revenue growth to 2027E," it said.

RBC said it would expect increased Wound Care volumes to lead to meaningful operating leverage in manufacturing and SG&A, plus meaningful mix benefits, leading to earnings growth meaningfully higher than revenue.

"Our top-down model indicates that continuing execution could imply circa 13% upside to consensus forecasts for Wound Care in 2027, or ,more than 5% upside to group revenue forecasts. We estimate that nearly half of ConvaTec's growth in Wound Care will be through market share gains.

"We update our forecasts to include risk-adjusted estimates from our top-down model, leaving us 4.1% and 6.0% ahead of consensus on 2027E revenue and EPS respectively.

"We update our valuation methodology to reflect ConvaTec's higher growth and margin profiles, leading us to increase our price target…and upgrade to outperform."