Carmila's Undervaluation Potential Amid Medtech Sector Rotation: A Strategic Investment Case

The medtech industry in 2025 is undergoing a seismic shift, driven by sector rotation toward high-growth therapeutic areas such as pulse field ablation, structural heart, robotics, and diabetes. According to EY's Pulse of the MedTech Report, industry revenue has surged to $584 billion, with innovation and expansion outpacing peers in these niches. Mergers and acquisitions (M&A) have become a cornerstone of growth, with deal sizes rising 11% year-over-year and venture capital investments surging 16% to an average of $36 million per round. Meanwhile, companies leveraging AI and digital health tools to optimize operations are redefining competitive advantage.

Against this backdrop, Carmila (ENXTPA:CARM), a French real estate investment trust (REIT), appears to trade at a compelling discount. As of October 2025, Carmila's trailing P/E ratio stands at 6.74, and its forward P/E is 9.13, according to Carmila valuation metrics, significantly lower than the medtech sector's average P/E of 22.5 (derived from EY's 2025 data). This valuation gap raises a critical question: Is Carmila undervalued, or is its business model misaligned with the evolving medtech landscape?

Strategic Alignment and Financial Resilience

Carmila's 2025 financial performance underscores its operational strength. The company reported a 15.4% year-over-year increase in net rental income to €203.4 million in the first half of 2025, driven by the successful integration of Galimmo, a 2024 acquisition that added 51 shopping centers to its portfolio, as detailed in Carmila's first-half 2025 results. EBITDA rose 14.1% to €176.9 million, and recurring EPS guidance was revised upward to €1.79 for the full year. These metrics reflect a disciplined approach to capital allocation and asset optimization, with €29 million in mature assets sold to enhance liquidity.

However, Carmila's strategic focus remains firmly rooted in real estate and retail, with no direct investments in AI, robotics, or medtech innovation as of 2025, according to a Galimmo acquisition report. This divergence from high-growth medtech trends could explain its lower valuation multiple. Yet, the company's M&A activity-particularly the Galimmo acquisition-positions it to benefit indirectly from sector rotation. For instance, Galimmo's 52 shopping galleries adjacent to Cora stores could serve as hubs for medtech startups or healthcare service providers seeking physical infrastructure, as noted in the Louis Delhaize sale. Carmila's sustainability initiatives, including a 54% reduction in emissions since 2019 and a net-zero target by 2030, also align with the ESG-driven priorities of medtech investors (as reported in Carmila's first-half 2025 results).

Sector Rotation and Undervaluation Dynamics

The medtech sector's current premium valuation reflects investor optimism about AI-driven diagnostics, robotic surgery, and digital health platforms. According to EY, 72% of medtech executives prioritize M&A to accelerate innovation, while 68% are investing in AI to streamline supply chains. Carmila, by contrast, lacks direct exposure to these trends. Yet, its low P/E ratio suggests the market may be underappreciating its long-term potential.

Consider the following:
1. Balance Sheet Strength: Carmila's liquidity of €652 million and a net debt-to-EBITDA ratio of 7.6x provide flexibility to pivot into high-growth sectors through strategic acquisitions or partnerships.
2. Portfolio Diversification: The company's shift toward health, beauty, and sport sectors within its retail mix could position it to capitalize on the convergence of consumer health and medtech.
3. Tariff Resilience: As global trade pressures persist, Carmila's focus on domestic real estate assets insulates it from currency and geopolitical risks that weigh on export-heavy medtech firms (per EY's analysis).

Conclusion: A Case for Reassessment

Carmila's undervaluation is not a flaw but a reflection of its current strategic focus. While it lacks direct involvement in AI or robotics, its financial discipline, M&A acumen, and real estate portfolio offer a unique value proposition in a sector rotation environment. For investors seeking exposure to medtech growth without overpaying for speculative bets, Carmila's low P/E ratio and robust cash flow metrics present an intriguing opportunity. However, the company must demonstrate a clearer alignment with high-growth medtech trends-through innovation, partnerships, or targeted acquisitions-to fully unlock its valuation potential.