The adj. EBITDA margin of 31.9% stood out in Q4 (ABGSCe 38.6%, FactSet consensus 33.3%) but we believe it was mainly held back by temporary factors such as unusually high shipping costs (1.5pp. impact) and the scrapping of consumables (1.5pp.). These contributed to the adj. gross margin at 59.6% (-8pp y-o-y), but it was also impacted by a negative mix effect from the inclusion of Igenomix of 2-3pp (4-5pp FY impact). Sales, however, were better (3% vs. ABGSCe, 5% vs. cons.), with Igenomix contributing SEK 116m, 17% above ABGSCe (adj. for 12m in COVID-19 revs.). Organic growth of 4% was on the weaker side (ABGSCe 8%), but as it was mainly an effect of time-lapse sales normalising following recent strong quarters, we do not see this factor as anything dramatic. Americas had another good quarter with 15% organic growth while APAC was slightly weaker with China continuing to impose hard travel restrictions, impacting nearby IVF tourism markets.
Transforming food from good to great
Vitrolife is undergoing a transformation, adding a service business to its medical devices offering. As was evident in Q4, this comes at the cost of lower margins (Igenomix ~50% GM, ~25% EBITDA), but more importantly it gives it access to the attractive, high-growth PGT segment. Igenomix’s core business grew by an impressive 37% in 2021 and while it’s likely boosted by pandemic recovery, we believe it’s poised for mid-term growth close to 20%, cementing Vitrolife group org. growth above 10%.
Estimates down 6% - valuation 10% below 2y average
We increase our sales estimates by 1-2%, driven by Igenomix, and lower our adj. EBITDA margins by ~2.5pp, causing revisions of -6% to ’22-‘23e adj. EBITDA. Rep. EBIT is down on higher PPA amortisation. The share declined by 17% on the report, taking it down 42% YTD, and it is
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