ASX share undervalued as margins expected to rebound

Morning Star AU06-17

We transfer coverage of Ansell (ASX.ANN), a leading supplier of protective gloves in healthcare and industrial settings. The majority of sales come from its key branded product ranges. It has a global...

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The majority of sales come from its key branded product ranges. It has a global...</p>\n\n<a href=\"https://www.morningstar.com.au/stocks/asx-share-undervalued-margins-expected-rebound\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IXJ","symbol_name":"全球医疗业ETF-iShares","start_time":0,"source_url":"https://www.morningstar.com.au/stocks/asx-share-undervalued-margins-expected-rebound","article_id":"2644189957","we_media_id":null,"thumbnails":[],"rights":{"source":"morningstar_stock","url":"https://www.morningstar.com.au/stocks/asx-share-undervalued-margins-expected-rebound","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2644189957","pubTimestamp":1781625600,"columns":[],"sourceInfo":{"source_id":"morningstar_stock","name":"Morning Star"},"weMediaInfo":null,"summary":"We transfer coverage of Ansell (ASX.ANN), a leading supplier of protective gloves in healthcare and industrial settings. The majority of sales come from its key branded product ranges. It has a global","collect":0,"end_time":0,"defaultTopTitle":"morningstar.com.au","property":[],"viewcount":null,"language":"en","relate_stocks":{"IXJ":"全球医疗业ETF-iShares","BK4550":"红杉资本持仓","BK4588":"碎股","BK4585":"ETF&股票定投概念","VHT":"Vanguard Health Care ETF"},"translate_title":"由于利润率预计反弹，澳大利亚证券交易所股价被低估","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"VHT":0.61,"IXJ":0.61},"content_text":"We transfer coverage of Ansell (ASX.ANN), a leading supplier of protective gloves in healthcare and industrial settings. The majority of sales come from its key branded product ranges. It has a global manufacturing and distribution footprint, supplying directly and via key partners in over 100 countries.The bottom line: We keep our $35 fair value estimate, and narrow moat, Exemplary Capital Allocation, and Medium Uncertainty ratings. Shares are undervalued, as we expect margins to expand, benefiting from digital initiatives and improved fixed-cost leverage as sales volumes grow.We expect EBIT margins to better prepandemic levels and expand to 17% in fiscal 2030, from 15% in fiscal 2026. Our forecast five-year revenue CAGR of 4% assumes customers’ broad acceptance of tariff costs, with industrial and surgical sales growth at 3% and 4%, respectively, despite higher pricing.Its productivity program is on track. We forecast USD 10 million in annualized savings in fiscal 2026, largely from supply chain efficiencies. We expect further productivity gains from fiscal 2027 from digital initiatives, such as enterprise resource planning system consolidation.Big picture: We expect improved profitability, and higher pricing can be maintained. Ansell completed tariff-related price increases in October, but we see limited competitive pressure as it holds many of the largest and most reputable brands in the industries it serves due to product differentiation.It is mostly offsetting USD 80 million in higher US tariff costs through price hikes. About 46% of sales are from the US, with sourcing from Malaysia, Sri Lanka, and Thailand. The average tariff rate from these countries is 19%, but it is largely passed on to customers.We expect price increases to have limited impact on demand due to pricing power, and that most competitors’ products are also shipped to the US from Southeast Asia. Shifting production to the US to avoid tariffs remains uneconomic for Ansell and competitors.Business strategy & outlookAnsell’s focus is on its key brands across industrial and healthcare settings. Each market is quite fragmented and Ansell’s market share varies by subsegment, but the firm has consistently held the highest or second-highest global market share in its key verticals. Competitors differ between the two segments but are either divisions of large global players or regional companies. Key industrial competitors are Honeywell, Globus, a private UK company, and ATG Gloves in the US. In the healthcare segment, Halyard Health (spun out of Kimberly-Clark in 2014) and Cardinal Health are major players.Ansell’s revenue is split approximately 45% industrial and 55% healthcare products. The industrial segment is exposed to global manufacturing cycles and the purchasing managers indexes are key leading indicators of Ansell’s industrial revenue growth. Revenue from the healthcare segment demonstrates far lower cyclicality and we expect it will typically outgrow industrial revenue similar to historical trends.We estimate the global protectivewear market to grow in the low single digits, driven by the positive trends toward improved workplace safety, but partially offset by increasing automation. The largest growth opportunity is in industrial emerging markets where a large proportion of workers still do not use protective gloves. Ansell has specifically designed an entry-level range, Edge, to gain traction in these price sensitive markets where products are typically more commoditized.Ansell’s margins are sensitive to key input prices being yarns, butadiene for nitrile rubber gloves, and natural rubber for latex gloves. The approximately five-month lead time from raw material procurement to product sale provides Ansell with a window in which to manage customer pricing and pass through increases in input costs if necessary. Only a small proportion of group sales, mostly in European healthcare, are made on a price-driven tender basis. Ansell is also shifting to more neoprene usage, as well as furthering its internal manufacturing efforts to limit the impact of external cost pressures.Bulls sayThe fruits of Ansell’s restructuring efforts, being improved organic growth and expanding margins, are becoming evident.Ansell has demonstrated good capital allocation skills and has successfully integrated acquisitions and consolidated the product portfolio into key brands.The company has balance sheet capacity for acquisitions and share buybacks, both of which could enhance shareholder returns.Bears sayCost pressures such as tariffs, and common supply chain disruptions weigh on operations.The opportunity in emerging markets as work safety standards improve is likely to be first captured by more commoditized products that largely compete on price.Although Ansell is a leading supplier by market share, with a narrower focus for both R&D and sales efforts, it still competes with larger competitors, such as Honeywell and Halyard Health, that have more complete protective-wear offerings.Subscribe to get Morningstar insights in your inbox","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"isLaohu8Offline":false,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.44.0","shortVersion":"4.44.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2644189957","isCrawlerRequest":true}