Vitrolife: Getting a good grip on Genetic Services - ABG
This is a third party research report and does not necessarily reflect our views or values
Consumables slump signalling bigger slowdown
We cut ‘23e EBIT by 4% on lower growth and margins
Trading at 22x CFY EV/EBITDA (5Y avg. 43x)
On track to lift margins with actions taken in Genetic Services
Vitrolife is delivering on its action plan to increase profitability in Genetic Services. It has discontinued non-core GPDx and Oncology testing, as well as cutting ~20% of the workforce. We expect that it can reach a 30% margin in the long term and 25% already in ‘23e, supporting a long-term group margin in the high 30s. Growth in terms of IVF cycles is slowing down, as shown by consumables sales growing a modest 6% organically, with Americas at +4% and EMEA at -9%. Consumables was 3% below ABGSCe. Technologies also underperformed (-11% vs ABGSCe), with the segment declining 9% organically. Genetic services was the only segment that outperformed, delivering 4% higher sales than we expected. Q3’22 saw the group EBITDA margin (pro forma), adjusted for one-offs in VAT, restructuring and insurance, decline by 2pp vs. Q3’21 to 32.3%. We estimated an EBITDA margin of 33.3%. Considering the one-offs, underlying profitability looks a bit less impressive, although it was 2% better than consensus expectations on 3% better sales. The lower margin mainly stems from the deviation in sales mix, with Genetic Services constituting a larger share of sales than we expected.
We cut ‘23e EBIT by 4% on lower growth and margins
Trading at 22x CFY EV/EBITDA (5Y avg. 43x)
On track to lift margins with actions taken in Genetic Services
Vitrolife is delivering on its action plan to increase profitability in Genetic Services. It has discontinued non-core GPDx and Oncology testing, as well as cutting ~20% of the workforce. We expect that it can reach a 30% margin in the long term and 25% already in ‘23e, supporting a long-term group margin in the high 30s. Growth in terms of IVF cycles is slowing down, as shown by consumables sales growing a modest 6% organically, with Americas at +4% and EMEA at -9%. Consumables was 3% below ABGSCe. Technologies also underperformed (-11% vs ABGSCe), with the segment declining 9% organically. Genetic services was the only segment that outperformed, delivering 4% higher sales than we expected. Q3’22 saw the group EBITDA margin (pro forma), adjusted for one-offs in VAT, restructuring and insurance, decline by 2pp vs. Q3’21 to 32.3%. We estimated an EBITDA margin of 33.3%. Considering the one-offs, underlying profitability looks a bit less impressive, although it was 2% better than consensus expectations on 3% better sales. The lower margin mainly stems from the deviation in sales mix, with Genetic Services constituting a larger share of sales than we expected.