Vitrolife - Breaking down the cyclicality of the IVF market - ABG

High out-of-pocket costs cut growth in ‘09-10 (GFC) Caution reflected in estimates; 35x ‘22e EV/EBITDA Q2: solid 13% organic growth, q-o-q margin improvement Breaking down the cyclicality in the IVF market Given the relatively high out-of-pocket costs and the weakening outlook for consumers, we have in this report looked into the cyclicality of IVF. Our key conclusions are: 1) the number of IVF cycles did not grow in 2009-10 following the global financial crisis and the US device/consumables market declined -15% in 2009, 2) leading consumer sentiment indicators in Europe and the US are currently below their 2008-10 levels, which could impact IVF volumes and Vitrolifes’s Consumables and Genetic Services business (>80% of sales), 3) improvements to insurance coverage and reimbursement should make the market more resilient today and 4) the market has historically posted strong rebounds following periods of weaker growth. Solid growth and margin improvement expected in Q2’22 In the Q2’22 report due 15 July, we expect the strong demand to continue and forecast 13% organic growth. We expect a small sequential improvement in the EBITDA margin to 31.4% (Q1’22 30.5%), mainly driven by higher volumes and improvement in Genetic Services, although we believe there is more room for Genetic Services to return to its historical levels above 25% (we currently estimate <20%).> Estimates and valuation We have reviewed our estimates and included a more cautious view on growth in H2’22e and ‘23e, as reflected by our org. growth of 11%, 10% and 13% for ’22-‘24e, respectively. Our positive revisions for ’22-‘24e of 4-6% to sales and 6% to EBITDA are mainly driven by FX. Vitrolife is currently trading at NTM EV/EBITDA of 31x on FactSet estimates and 35x on ABGSCe, which is roughly 15% above its pre-pandemic levels (~31x). On ABGSCe, ‘23e EV/EBITDA is at a 25% premium to Nordic MedTech and a 5% premium to Nordic high-growth MedTech. 20%).>Läs mer på ABG Sundal Collier