In the first full quarter with the newly-acquired Genetic Services division, Vitrolife delivered a strong sales figure with 11% organic growth (Pro Forma ex-COVID). Both Genetic Services (10% org. growth ex. COVID) and Technology (19% above ABGSCe) were solid, but we are most impressed by the strong Consumables sales from all regions (18% org. growth), showing that it continues to outperform the market. The COVID-19 business is almost fully phased out, while it is investing and re-allocating resources to genetic disorder testing (GPDx). This drove a lower EBITDA margin at 30.4% (-4pp. vs Q1’21 Pro Forma) and EBITDA below expectations (-4% vs ABGSCe, -10% vs cons).
Management is confident in margin increases
We believe there is a strong rationale behind the expansion of the genetic disorder testing as it provides another tool for further successful pregnancy outcomes. Growing rapidly with accretive gross margins, management expects it to be breakeven in reasonable time. Overall, management was confident during the conference call that it will get the EBITDA margin in Genetic Services back to the historical >28%, which implies >36% EBITDA margin potential for the group. We currently estimate 31-33% for ’22-‘24e.
Negative 9-3% EBITDA revisions
We lower near-term sales in Genetic Services from phasing out COVID-19 testing but leave costs unchanged to reflect investment in GPDx. We make minor changes to underlying sales, driving 9-3% negative EBITDA revisions for ‘22’-24e. Our EPS revisions are higher, driven by a higher tax rate. We currently forecast Vitrolife to deliver 12-11% organic growth in ’23-‘24e with EBITDA growth >15%. The share declined 18% on the report, taking it down 55% YTD. On our revised estimates, it is now trading at 38x ‘22e EV/EBITDA. This is 13% lower than its 5y average and 27% lower tha ...
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