Vitrolife reported a strong set of numbers in Q2, outperforming expectations on both organic sales growth (+4% vs. ABGSCe 0%) and the gross margin (59.9% vs. ABGSCe 57.3%), resulting in a 10.8% EBITDA beat vs. ABGSCe (and +10% vs. consensus). The main reason for the higher-than-expected earnings in Q2 was the very strong performance of its Technology business, which also helped to drive gross margin improvements in Q2. The Technology division reported organic sales growth of 40% in Q2 (ABGSCe +7%), helped by strong development in both EMEA and North America. The Genetics business is still suffering from negative growth in North America, but we expect growth to return in H2 on a lower base after one year with negative growth development.
Estimate changes
We raise our '24e-'26e EBITDA by 2.2%-3.3% following the Q2 results and updated FX assumptions. We expect to see a return to double-digit organic sales growth for Vitrolife in H2, but expect a lower gross margin due to mix effects, with a higher share of revenues coming from Genetics. For '25e-'26e, we make very small changes to our organic growth rate assumptions and EBITDA margin forecast. We forecast 8.3-8.4% organic sales growth and a 33.1%-33.5% EBITDA margin for '25e-'26e.
39.2x '24e EV/EBIT below historical average, but above peers
Based on our updated forecast, Vitrolife is trading at 39x '24e EV/EBIT, which is below its historical average on NTM EV/EBIT based on FactSet consensus. However, compared to a broad range of Swedish medtech peers, Vitrolife is trading 37-110% above consensus NTM multiples (P/E and EV/EBIT).
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