Allium Medical Solutions Ltd (TA:ALMD) has reported FY16 financial results, which impressed with revenue growth of 42% to NIS7.4m vs NIS5.2m in 2015, in line with our expectations. Gross margin doubled to 30%. This increase comes mainly from Allium Stents and IBI Medical. We are encouraged to see that the company continued to execute on its business plan of organic growth and margin expansion; therefore, the investment case remains intact, in our view. We maintain our revenue CAGR forecast of 41% in 2016-20e and our DCF valuation of NIS1.95-2.08/share.
Revenues grew 42% y-o-y; gross margin expands
Revenues grew 42% year-on-year with c 70% of sales coming from Allium Stents, and the rest mainly from IBI Medical (EndoFast urogynecology). While the main market was still Europe, other regions such as South Korea, Argentina, Australia, Canada and South Africa gained traction in 2016 as well. Allium has distribution agreements worth c NIS185m for its peripheral stents and IBI products which could continue to support a double-digit percentage increase in total revenues. Gross margin doubled from 15% in 2015 to 30% in 2016, due to economies of scale and increasing revenues. G&A expenses remained stable over 2016, increasing by 6% due to non-cash stock-based compensation expenses. S&M costs increased 38%, albeit from a low base of NIS2.1m to NIS2.9m. R&D spend was up 32% to NIS13.5m as a result of an increased investment related to Allevetix (gastroduodenal bypass sleeve), Gardia (embolic protection system) and the initiation of the TruLeaf mitral valve replacement project. Having incorporated FY16 numbers, we have slightly adjusted our cost and earnings forecasts.
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