Boule Diagnostics reported a mixed set of numbers in Q3 with weaker-than-expected sales (-4% vs ABGSCe) but a higher gross margin (46.8% vs AGBSCe 44.5%) and lower opex, resulting in adj. EBIT of SEK 15.3m, +45% vs. ABGSCe. The main reason for the deviation on sales was fewer instruments sold (716 vs. ABGSCe 1,050) at a lower ASP (SEK 39.7k vs. ABGSCe 44.8k). At the same time, sales of consumables were better than expected, driven by sales of OEM consumables. Cash flow from operating activities weakened in Q3, down to SEK 5.2m (SEK 13.8m in Q2'24), which together with total capex in Q3 of SEK 16.5m (SEK 13.2m in capitalisation of R&D) continues to hold back FCF. As of 30 September, the company had SEK 17.2m in cash and an additional SEK 31.0m in credit facilities available.
Focus on improving growth and margins
Management is focusing on expanding the operating margin by reducing the cost base and improving efficiency in COGS through supply chain improvements. Another focus area is to accelerate sales growth, which will require some strategic investments, for example by establishing a local presence in key markets. In addition, management wants to improve the product offering with new products, both in-house but also through partnerships and distribution agreements.
'25e EV/EBIT at 4.7x, 66% below its historical average
At 4.7x '25e EV/EBIT, Boule Diagnostics is trading 66% below its historical average on NTM EV/EBIT. We expect to see a turnaround over the coming years driven by improving sales growth and margin expansion, but the timing remains uncertain. We forecast a pickup in organic sales growth already next year, but we are still below management's long-term targets of >10% sales growth and a >15% EBIT margin.
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