1、ab3 July 2025Global ResearchConvaTec Group PlcNothing good comes easy,BuySympathy for reimbursement frustration,but looking beyond headlines is keyWe 1)preview H1 results where we see scope for a modest guidance upgrade,and 2)explain why even in a bearish(unlikely)US reimbursement scenario we estima

2、te just 5%downside to our group EBIT forecasts for 2026/27E.We understand that the shift once again of the Convatec equity story to a defensive reimbursement focus is unhelpful,but in contrast to this time last year when reimbursement was also an issue,management is demonstrating consistent double-d

3、igit EPS growth and significant cash generation.We reiterate our Buy rating and believe that value will be realised one way or the other.H1 preview:guidance upgrade potentialConvatec reports H1 results on 29 July 7am UKT.We forecast group revenue growth of 5.9%organic,in line with consensus,and an a

4、djusted EBIT margin of 21.4%,slightly below consensus at 21.6%,albeit still 140bp up year on year.For context,management is guiding for 5.5-7.0%organic revenue growth(ex-Innovamatrix)and a margin of 22.0-22.5%vs.21.2%in 2024.At the mid-point of its margin guidance,management expects a 100bp expansio

5、n and has flagged that it expects this to be evenly spread across H1 and H2.We model 150bp expansion for the full year,hence are above the top end of the guide,and assume 140bp in H1 with 160bp in H2.We believe management can reiterate its sales guidance but raise margin guidance to around 22.5%,rem

6、oving the 22.0%low end.Reimbursement uncertainty unhelpful,but priced inAfter a CMS(Centres for Medicaid and Medicare Services)proposal to change the way home health care is reimbursed,Convatec shares are down 10%.The proposal is in draft stage,highly complex,and heavily caveated.In our view,impleme