Vitrolife: Promising action plan for margin improvement - ABG

EBITDA 8% above cons, discontinuing non-core areas Initial signs of lower IVF cycle growth near-term EBITDA up 5-8% for ’22e-’24e, EV/EBITDA 37x on ’21e Q2 indicating margin improvement ahead

Vitrolife delivered a promising action plan on how to increase the profitability in Genetic Services. Management has decided to discontinue non-core GPDx and Oncology testing, as well as cutting 7% of the workforce. With these efforts it believes the segment could achieve a margin of 25% already in ’23, and then as much as 30% in the long term (for Q2’22 we estimate ~20%), which should enable the group to reach a EBITDA margin in the high 30s (ABGSCe FY’22e 32.6%). In Q2 the group EBITDA margin improved 2pp from Q1, to 32.9% (ABGSCe 31.4%, FactSet cons 32.7%), but it was mainly better sales that drove the beat on EBITDA (12% vs ABGSCe, 8% vs cons). The “old Vitrolife” delivered strong 18% organic growth (ABGSCe 13%), as well as Genetic Services, which grew 7% despite the loss of a large customer in Europe. We were most excited about Technologies (13% vs ABGSCe), however, which grew 29% and is seemingly benefitting as a perceived efficiency solution amid the ongoing labour shortages.

Initial signs of a market slowdown Despite the sales beat, consumables in Americas and EMEA grew by only 2% and 3% organically. Management highlighted that this could be an initial sign of a slowdown, due to the ongoing macroeconomic situation, and anecdotally highlighted that waiting lists in European IVF clinics are shrinking or disappearing. While it acknowledged that near-term growth could be lower, it did not seem concerned, as periods of lower growth in Cycles historically has only been temporary.

EBITDA up 5-8% for ’22-’24e – EV/EBITDA of 37-31x ’22-’23e We increase our sales estimates for ’22-’24 by 3%, mainly driven by Americas and Asia, while our EBITDA is up 5-8% on a higher margin assumption for Genetic Services. We remain cautious on the near-term market growth, reflected in our organic g ... Läs mer på ABG Sundal Collier

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