Strong performance of surgical robots continues

In this report, we update our forecasts and valuation of Synektik after the publication of results for 2Q22/23. Based on the new upgraded forecasts and the current risk-free rate, we set our Fair Value at PLN 75.0ps, which implies 0% upside potential of the current share price. We downgrade our recommendation to HOLD. Synektik has an excellent business momentum in FY2022/23, the company has again increased its guidance for da Vinci system sales in Poland and Czechia.

We believe that the momentum will continue in the next years, as the device utilization in Poland building up. We now assume Synektik will deliver 18/14/12 da Vinci surgical robots in 2022/23E, 2023/24E and 2024/25E, respectively. After recent share price rally Synektik is trading at 8.9x EV/adj. EBITDA for 2022/23E and 8.9x for 2023/24E; we see that most of upside has materialized and further share price growth potential is limited, therefore we downgrade Synektik to HOLD. Da Vinci sales momentum continues.

In 1H22/23, the company booked a record ten deliveries of da Vinci surgical robots, and signed another eight contracts for deliveries in 2H22/23. We assume five robots to be sold in 3Q22/23 and three in 4Q22/23, in total 18 devices vs. our earlier assumption of 16. As the demand remains strong (also in Czechia and Slovakia), the geographic distribution of surgical robots in Poland is uneven and NFZ may expand the scope of reimbursement of surgical procedures using da Vinci, we have raised our sales forecasts for the following years: we assume 14 deliveries in FY2023/24 (previously 11) and 12 deliveries in FY2024/25 (previously 10).

In our opinion, the number of surgical robots in Poland can easily reach 50-60 in the next few years, which will support Synektik’s revenues on device sales, as well as increase recurring revenues from service and consumables. Adjusted EBITDA at PLN 65.4m in 2022/23E.

Since the current backlog for da Vinci systems exceeds our forecasts, we increase our sales forecasts to 18 devices from 16 previously. Consequently, we are raising our forecasts for FY22/23: we estimate PLN 359m in revenue (previously PLN 325m), PLN 65.4m in adjusted EBITDA (previously PLN 59.8m) and PLN 32.0m in net profit (previously PLN 28.2m). We assume that the DPS in the next financial year could almost double to PLN 1.1ps vs. the last payout of PLN 0.6ps. Recommendation and valuation.

We value Synektik using a 10-year DCF model. Taking into account the new financial and FX forecasts and the current risk-free rate, we are upgrading the company's Fair Value to PLN 75.0ps from PLN 56.7ps. The new valuation implies 0% upside potential relative to the current share price, and therefore we downgrade our recommendation to HOLD.