North America below, but EBITDA margin held up

Lower expectations for Q4 but outlook remains positive

’21-‘22e EBITDA down 5%; share at 31x ‘22e EV/EBIT

North America sales below expectations, but margins solid
The Q3'21 report came in below our expectations, with organic growth of -17% (vs. ABGSCe -1%) for sales at SEK 159m (-14% vs. ABGSCe 184m). The deviation was manly driven by North America, where the company highlighted COVID-19-related stocking effects in the comparison quarter alongside the SEK 15m one-off last year. We believe EMEA performed well, while APAC reverted somewhat from the last quarter. Considering the lower sales, one positive note was the EBITDA margin at 26.6% (ABGSCe 26.7%), which was helped by a gross margin in line with expectations (Q3’21 41.9% vs. ABGSCe 42.9%), and strong opex cost control.

Recent partnerships bode well for the future
Despite multiple weaker quarters for Probi, management remains positive on the outlook and expects to return to growth in the upcoming quarters. Likewise, we appreciate the recent commercial agreements and partnership that Probi has singed over past 12 months. We particularly like the Blis deal, which broadens its offering to ear, nose and throat. Probi has commenced sales and R&D integration, and believes it could start contribute to sales in H2’22. Management was also rather upbeat about the finish to the year in APAC, where the Sinopharm partnership is developing according to plan.

31x EV/EBIT in ‘22e – 5% above its two-year average
On the back of the report, we lower our expectation for Q4 North America sales and make no other changes to estimates, leading to ’22-‘23e EBITDA estimates declining by 5%. Probi ended Q2’21 with a net cash position of SEK 195m, and while our forecasts exclude M&A, we estimate Probi could add ~14-19% to ‘21e EBIT via potential M&A. The share is trading at 30x EV/EBIT ‘22e, or ~5% above its two-year average and ~5% above key peer BioGaia.

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