Sales +34%, organic growth +18%, EBITDA beat +4%

Small positive estimate revisions

Valuation remains high, EV/EBIT of 45x for 2019e

Strong Time-lapse sales in a solid Q2’19
Vitrolife delivered a solid set of numbers for Q2, with organic growth totalling 18% (vs. ABGSCe 11%), driving total sales to SEK 381m (+8% vs. ABGSCe and +9% vs. FactSet cons.). All market regions contributed well to the top line by reaching double-digit growth. On a divisional level, Time-lapse surprised us with a stellar 56% growth y-o-y, with a solid contribution from the EmbryoScope+ order to China. Despite an unfavourable mix with Genomics reaching more normalised sales after the start-up phase in Q1, the gross margin held up better than expected. We assess the higher volume and capacity utilisation to have been the main drivers of this deviation. That said, EBITDA was only 4% and 6% above ABGSCe and consensus, respectively. Investments to ensure future growth, most notably within sales and marketing, drove the majority of the 34% opex growth, leading to an EBITDA margin of 38.5%, or -250bp y-o-y.

Sales up 3%, EBITDA up 1-2% for ’19e-’21e
We lift our sales estimates by 3% and our EBITDA by 1-2% for our forecast period, mainly due to higher Time-lapse estimates. The demand for EmbryoScope+ in China remains high, we believe, and we continue to argue that it will be an important driver of growth for ‘19 and beyond. However, we note that sales for the segment will be lumpy on a quarterly basis, and that further large orders could give upside potential to our estimates. Furthermore, we raise our cost assumptions to reflect Vitrolife’s latest investments.

EV/EBIT of 45x for ’19e is 29% above its historical average
After the share price rally on reporting day, the share is now trading at an EV/EBIT of 45x and P/E of 59x for ’19e. This is 29% above its historical two-year average.

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