Vitrolife reported a mixed set of numbers in Q3, but with clear signs of underlying improvements. Net sales was SEK 867m in Q3 (-3.0% vs ABGSCe, -3.6% vs cons), but the gross margin improved to 58.6% (ABGSCe 57.3%, cons 57.9%) on favourable product mix and improved efficiencies. Even though total sales came in short of expectations, the Consumables business reported an impressive 13% organic growth (ABGSCe +11%) and there was 11% growth in Technologies (ABGSCe +4%). The Genetics business came in below expectations, with 0% organic growth (ABGSCe +6%), but we are pleased to see the Genetic Services business (~90% of Genetics) having 5.5% growth, including 9% growth in North America after several quarters with negative growth. The 26% drop in genomic kits (~10% of Genomics) is related to stocking effects from 2023, and should have less impact going forward. Total EBITDA came in at SEK 289m (+0.4% vs ABGSCe, and -4.7% vs cons).
Estimate changes
We lower our '24e-'26e EBITDA by 1.3%-2.1% following the Q3 results, mainly due to lower sales. Despite coming in below expectations in terms of sales growth, the organic growth rate in Q3 was the highest since Q4'22. We see a risk of a slowdown in Technologies sales in Q4 due to tough comps, holding back the total organic growth rate for Q4, but we then expect to see a gradual improvement in the organic growth rate towards the long-term term target of a double-digit growth rate in '25e-'26e.
39.7x '25e EV/EBIT below historical average, but above peers
Based on our updated forecast, Vitrolife is trading at 39.7x '25e EV/EBIT, which is below its historical average on NTM EV/EBIT of 43x based on FactSet consensus. However, compared to a broad range of Swedish medtech peers, Vitrolife is trading 35-61% above consensus NTM multiples (P/E and EV/EBIT).
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