Boule Diagnostics: Benefitting from healthcare recovery - ABG

23% organic growth for record Q1 sales
Margins held back by component situation
Trades at 11-8x our EV/EBIT in ‘22e

Another record quarter indicates healthcare recovery
Boule reported a strong organic growth of 23% for record high Q1 sales of SEK 133m (0% vs ABGSCe). This followed a record Q4 and to us this is a sign that healthcare practices are finally normalising. Sales in Asia stood out, as they more than doubled despite the region still being impacted by the pandemic, as well as record sales for OEM/CDS (now >20% of sales). In line with our expectations, the gross margin declined 1.5pp. y-o-y to 43% on the tougher supply chain, but increased customer activities drove a higher opex, and EBIT was below our expectations (SEK 10m vs. ABGSCe of SEK 15m).

Good performance in a complex environment
The supply chain continues to be tougher and higher component and logistics costs had a 5pp negative impact on the gross margin in Q1. Management expects material improvements in H2, but margins should also benefit from price increases, which are implemented continuously. Access to components is making the finalisation of the new five-part system more complicated but thus far it is moving forward and is about to enter the clinical evaluation phase. Overall, we believe Boule has navigated the tougher environment well, including the strong 1,207 instruments deliveries in Q1 (ABGSCe was 1,115), but the continuously high orderbook suggest it could be even higher. Unsurprisingly, the near-term outlook was cautious on the back of Russia’s invasion of Ukraine and sales in the countries are currently low, albeit not zero.

9-3% EBIT revisions; 11x ‘22e EV/EBIT
Our estimates already reflect the low contribution from Eastern Europe and gross margin headwinds, but we have increased opex post the report, driving 9-3% EBIT cuts. We see sales in the coming quarter continuing to benefit from a healthcare normalisation, while operating leverage, price increases and an improving supply situation ...
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