ConvaTec Group PLC 

ConvaTec Group PLC (LSE: CTEC) is an FTSE 100-listed medical products and technologies company. The company is employed in developing, manufacturing, and selling of medical products. Predominantly, the healthcare entity focuses upon solutions of chronic solutions for the management. This Report covers the Key Recommendation Rationale, Conclusion, and Recommendation on the stock.

Key Recommendation Rationale – Sell at GBX 290.40

• Resistance near Current levels: CTEC’s stock price crossed the Resistance (R1) which was stated in the previous report on 01 May 2025 therefore, there can be a possibility of a decline in resistance levels. Considering the market conditions and the price action, it is prudent to exit the stock.
• Revenue Risk from LCD Impact on InnovaMatrix® (~$50m Loss): Convatec expects a $50 million drop in revenue (~2% of group total) in FY25 due to Medicare’s LCD ruling removing coverage for InnovaMatrix® in DFU/VLU treatments, which made up 75% of its 2024 sales. This creates near-term revenue pressure despite ongoing growth in non-DFU/VLU indications.
• Slower Core Growth Without InnovaMatrix® Contribution: While total organic growth was 7.7%, it falls to 6.8% when excluding InnovaMatrix® in FY24. Key categories like Advanced Wound Care grew only 4.2% without it, suggesting core growth is more modest and increasingly dependent on a few standout products.
• Macroeconomic Risk: The market sentiments can remain weak in the short term due to the subdued consumer disposable income, geopolitical tensions, and political risks.

Valuation Methodology: Price/ Earnings Approach

Share Price Chart  

Conclusion

CTEC may trade at a discount, pressured by multiple headwinds including the anticipated ~$50 million revenue hit from Medicare’s LCD ruling on InnovaMatrix®, softer underlying growth with organic revenue excluding InnovaMatrix® slowing to 6.8%, and the potential for margin expansion to moderate despite a 100 bps rise to 21.2%, given elevated capex and R&D spending plans. Additionally, higher tax expenses and ongoing structural cost burdens—including policy-related disadvantages and persistent inflation—are likely to constrain profitability.  For conducting the valuation, the following peers have been considered: hVIVO PLC (LSE: HVO), Uniphar PLC (LSE: UPR), etc.

Given its current trading levels, the recent financial performance, strategic investments and partnerships, market expansion and cost optimization strategies, relative valuation, and associated risks, it is prudent to exit the stock at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the Closing Market Price of GBX 290.40 as of 29 May 2025.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 29 May 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/or technical analysis taking into consideration both short-term and long-term scenario.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 6: Dividend Yield may vary as per the stock price movement.