Biohit H1'24 preview: Opening of a new strategy period

Translation: Original comment published in Finnish on 08/05/2024 at 7:20 am EEST

Biohit will release its H1 report on Wednesday, August 7 at 9:30 am EEST. We expect the company to continue healthy growth during the first six months of the new strategy period. We expect the result to be at the level of the comparison period, as growth investments increase costs. Biohit’s H1 is seasonally stronger than H2, due to the cyclical spread of income from the Chinese distribution agreement.

Income from the Chinese distribution agreement strengthens revenue in H1         

Our H1 revenue estimate is 7.6 MEUR, which corresponds to a growth of 17% from the comparison period. Revenue is supported by the Chinese distribution agreement, the income of which focuses on H1. Biohit has successfully increased its revenue in recent years (2023: +19%), which creates confidence in growth also in the new strategy period 2024–2028 that just started. In line with the strategy, Biohit targets 15–20% growth, which we estimate is an ambitious but achievable target. According to the company’s IR blog published in the spring, the first half of the year has progressed along the strategy, even though the company did not report figures from Q1. Next to the figures, we are also interested in possible further information on the demand development for the Gastropanel® quick test as the supply chain challenges that previously plagued the company have subsided.

Profitability likely to suffer temporarily due to frontloaded growth investments

Our EBIT estimate is 1.4 MEUR, which corresponds to a decrease of 0.1 MEUR in the margin from the comparison period. Biohit has invested in growth, which was reflected, e.g., in the financial statements as an increased number of personnel. We expect growth investments to have burdened profitability, but, on the other hand, the investments will materialize as longer-term earnings growth So far, Biohit has not capitalized R&D costs in its balance sheet. We, therefore, expect cash flows to be in line with the result. Biohit’s balance sheet is very strong and is strengthening further, as the company did not pay dividends this spring. Biohit has stated that acquisitions are part of its growth toolkit, but there is currently no visibility to potential acquisitions. A strong balance sheet and a good level of defensive profitability give the company a fair amount of financial leeway.

Healthy growth and profitability expected for the rest of the year

Biohit’s guidance for 2024 is that revenue will grow from 13.1 MEUR last year to 15.1-15.7 MEUR. The guidance range would correspond to the 15-20% growth target of the strategy. Our full-year 15.3 MEUR forecast is in line with the guidance. In terms of the operating result, Biohit's guidance is a relative profitability of at least 10%. This would correspond to an EBIT of at least 1.51 MEUR based on the bottom end of the guidance range. Our operating result expectation in 2024 is 2.0 MEUR, which is 13% of our revenue forecast.