Vitrolife: A second wind for APAC growth - ABG

Q1 results show market share gains and operation improvement
'23e-'25e EBITDA up 1%
Trading at 34x '23e EV/EBITDA vs. pre-pandemic level of 32x


Gaining market shares, seeing China recovery

Organic growth was again better than expected (6% vs. ABGSCe 3%), with APAC shining the brightest- up 19% organically (23% adj. for discontinued), as consumable and technologies growth took off. The APAC results was not driven by the re-opening of China: lead times (consultation, hormonal treatments) means activity for consumables picked up late in the quarter. Rather, we expect the APAC beat to have been driven by continued reimbursement-driven growth in Japan and market share gains from Cook Medical. Cook is no longer producing IVF media, meaning many customers in APAC are turning to Vitrolife. Management did notice a strong come-back in China at the end of Q1, after being halted during the lock-down, and expect it to perform strongly in the coming quarters. The gross margin improved 1.1p y-o-y and beat our expectations by 80bp. That was largely an effect of high consumable growth (+12% organically) that drove a supportive sales mix for the group. Genetic services are seeing improved profitability from cost savings and should be near 30% EBITDA margins. This is despite a relatively poor US sales mix where the higher growth of PGT-A tests relative to ERA had a noticeable negative effect on gross margins. With Genetic Services opex in good control, we expect that the higher gross margin contribution from ERA with higher growth rates should lead to it reaching 35% EBITDA margins within a few years.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/Vitrolife/Equity-research/2023/4/vitrolife---a-second-wind-for-apac-growth/