Boule Diagnostics: Another quarter of temporary headaches - ABG

Gross margin headwinds shadow ATH sales in Q2 Components and regulator capacity delay new portfolio Estimates cut 28-10%, trading at 12-8x EV/EBIT ’22-23e Q2: strong sales but temporary issues hold back margin

Boule delivered another report with strong sales (3% vs ABGSCe), showing that it finally is emerging from the strains of the pandemic. The supply situation, however, seemingly worsened in Q2, resulting in SEK 8m in extra costs (5m in Q1’22) and multiple production stops, leading to a gross margin of 37.8% (ABGSCe 44%). Opex was also on the higher side, with EBIT consequently -67% vs. our expectations. Boule has announced further price hikes towards the end of Q2 to mitigate these shortfalls. These have yet to be seen in the numbers and the company now sees a gradual normalisation in the gross margin from Q3. Although Q2 saw varied headwinds, we see them as temporary in nature and appreciate another quarter of sold instrument deliveries, which will allow Boule to continue to expand its recurring revenue base. We also note all-time high sales in both Latin America and Africa/Middle East, two regions that could continue to be growth drivers ahead.

New product portfolio delayed Boule also stated that the new product portfolio launch would be delayed, guiding for the first material sales to come in late ’24, or as late as ’25 in some regions. The reason, to our understanding, is twofold: Firstly, there are extended lead-times at the so called “notified bodies”, that have to certify all new products under the new IVD-R regulation in Europe, which was implemented in May this year. Secondly, access to components is delaying production of the final system. We believe the key milestone is to finalise the product to so it can start the clinical validation process to achieve a CE-mark under IVD-R

Estimates down 28-10%, trading at 12-8x EV/EBIT ’22-‘23e We raise our sales following the report on higher prices and FX, but reduce our gross margin expectations, causing -28-10% negative revisions to ’22-‘24e EBIT. ... Läs mer på ABG Sundal Collier

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