Coloplast down 4% as UBS sees limited upside after guidance cut

Coloplast (CSE:COLOb) shares fell over 4% on Friday after UBS downgraded the Danish chronic care products maker to "neutral" from "buy", saying its valuation leaves little room for further upside following cuts to its medium-term growth and margin targets.

The broker said Coloplast trades at about a 20% premium to the broader medical technology sector, a valuation it considers justified and already reflected in its price target. 

The premium is only slightly below its three-year average, which UBS said was consistent with slightly lower expected growth.

UBS’s previous buy rating was based on expectations that earnings were near a low, a new chief executive would reset medium-term targets and the share price had fallen too far. The broker said those factors were now largely behind the company.

At its full-year results this week, Coloplast cut its medium-term organic sales growth target to 5-7% from 7-8% and its margin outlook to the mid-20s from an improving margin.

UBS expects the investment story to shift "from reset and re-rating to consolidation and execution". It forecasts a weak first quarter, as average analyst estimates have only recently been lowered following the guidance cut, and models earnings per share growth of 3% in 2027, which it said offers limited compounding.

The analysts forecasts earnings per share of DKr24.90 for the year to September 2027, down from DKr25.06 and below analyst consensus of DKr25.54. For 2028, it forecasts DKr27.14, down from DKr27.67, against consensus of DKr27.57.

For 2026, UBS raised its earnings per share forecast to DKr24.96 from DKr24.15, compared with consensus of DKr24.70.

UBS cut its 2027 operating profit margin forecast by 60 basis points due to higher inflation and lowered its annual organic growth assumptions by 30-40 basis points. It forecasts annual revenue growth of 6.6% for 2027-2030, at the top end of Coloplast’s new 5-7% guidance range.

The broker forecasts a 12-month total stock return of 5.8%, including a 4.4% dividend yield, compared with its market return assumption of 7.9%.

UBS highlighted three factors to watch: signs of a return to growth at Kerecis, including hoped-for inpatient growth in the teens in the first quarter; lower operating costs from the second quarter to offset some gross margin pressure; and a payoff from U.S. investments by year-end, with stronger growth in continence and ostomy products.