Alcon: Razor-Blade Moat in Eye Care, With Margin Expansion Catalyst

Pieter Hundersmarck of Castra presented his investment thesis on Alcon AG (Switzerland: ALC, NYSE: ALC) at European Investing Summit 2025.

Thesis summary:

Alcon is the world’s largest eye care device company, domiciled in Switzerland and spun-off from Novartis in 2019. The company operates two segments: Surgical (56% of sales) and Vision Care (44% of sales). Peter analyzes the company from a quality growth perspective, noting its market leadership in an attractive space. The company is growing its market share, partly through bolt-on acquisitions, within a total addressable market (TAM) estimated at $35 billion.

The Surgical segment, which accounts for 60% of EBIT, provides equipment, consumables, and implantables (IOLs) for ophthalmic surgery. Peter finds this division attractive due to its wide moat, built on a razor-razorblade model. Alcon has an installed base of 28,000 surgical units, which drives recurring, high-margin revenue from proprietary consumables. This model, combined with brand leadership in premium IOLs like PanOptix and Vivity, creates high switching costs and provides pricing power.

The Vision Care segment consists of contact lenses and ocular health products, operating on a B2C model where Alcon competes on comfort, technology, and cost. The market benefits from tailwinds such as an aging population, which supports mid-single-digit growth. Peter views Alcon as a market share gainer, citing its share growth in the global vision care market from 11.7% in 2020 to 13.5% in 2024.

The central thesis rests on margin acceleration and rising ROIC, which Peter believes the market undervalues. ROIC has already improved from 6.1% in 2021 to 14.0% in 2024. The key catalyst is the roll-out of the new UNITY surgical platform, which is set to replace the 28,000-unit installed base over a five-year period. Peter argues this all-in-one platform offers superior hospital throughput and unit economics, which should drive operating margins from current levels toward 20-25%. The primary risk to the thesis is execution on this complex platform launch.

Peter’s valuation model is based on the UNITY roll-out, projecting a total revenue CAGR of ~7%. He forecasts operating margins improving to a 20-25% range, driven by manufacturing efficiencies and the premium product mix. Applying a 20x P/E multiple, his model yields a valuation range of $65 (bear) to $138 (bull). Compared to a recent price of $72, Peter sees an asymmetric payoff, believing the market is underestimating the impact of the upcoming platform replacement cycle.

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About the instructor:

Pieter Hundersmarck is the Chief Investment Officer of Castra, a family office based in Amsterdam. Pieter has been investing internationally for over 15 years and has broad experience across asset classes in developed and emerging markets. Prior to Castra, Pieter worked at Flagship Asset Management, one of South Africa’s most awarded boutique asset managers. Prior to that he worked at Coronation Fund Managers for 10 years, and also co-managed a global equities boutique at Old Mutual Investment Group. Pieter holds a BCom (Economics) from Stellenbosch University and an MSc Finance from Nyenrode Universiteit in the Netherlands.

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