Carl Zeiss Meditec AG (AFXG.DE): Valuation disconnected from fundamentals; downgrade to Sell

We downgrade Carl Zeiss Meditec to Sell from Neutral with a €23 price target (-26% downside vs 22% average upside for our coverage). Our thesis rests primarily on the disconnect between current valuation and our top-line growth outlook: shares now trade at 23.6x NTM P/E and have re-rated YTD alongside a deteriorating outlook for top-line growth (GSe +3.2% OSG in FY27-29) and meaningful negative EPS revisions (-54%/-45%/-39% FY26/27/28 EPS). We believe the re-rating has been driven in part by technical factors, namely Zeiss Group's June announcement to invest up to €200m increasing its stake in Carl Zeiss Meditec, but as buying support fades we expect the gap between valuation and underlying fundamentals to close. Although shares have already underperformed -21% YTD, we do not believe earnings have troughed, nor do we see the deteriorating top-line outlook reflected in valuation. We cut Adj. EBITA estimates (c.+2%/-11%/-6% FY26/27/28) as top line/earnings are impacted by IOL VBP 2.0 and