• Flat organic sales growth, due to Genetics
• EBITDA revised down 1.5%-2.3% for '24e-'26e
• 41-43% below historical multiples, but above sector peers

Solid Q1 despite low growth

Vitrolife reported a solid set of numbers in Q1, but with lower-than-expected organic sales growth (0% vs ABGSCe +1.8%). The Consumables and Technologies business areas delivered strong sales growth, +12% and +8% respectively, but the Genetics business was down 12% in Q1 due to a combination of ERA and PGTA, but also tough comps for Genetic kits from last year. The issues in the Genetics business are expected to continue into Q2 according to management, but ease in the second half of '24e. The gross margin held up well at 57.2% vs AGBSCe at 57.0%, and the opex was 3% lower than we expected. All in all, Vitrolife reported Q2 EBITDA of SEK 272m (+3.9% vs ABGSCe and -2.4% vs Modular Finance consensus) for an EBITDA margin of 32.3%.

Estimate changes

We cut our '24e-'26e EBITDA by 1.5%-2.3% on the back of the Q1 results and updated FX assumptions. We have lowered our organic sales growth forecast for '24e to +6.4% from +8.1%, but left it unchanged at +8.3% for '25e-'26e, and lowered our EBITDA margin assumptions by 40-70bp for '25e-'26e. For '24e, we expect the Genetics business to return to positive organic growth again in H2'24e.

25.7x '24e EV/EBIT below historical average, but above peers

The Vitrolife share is trading 41-43% below its historical 5-year averages on NTM multiples (P/E and EV/EBIT), but 16-33% above its Swedish medtech peers, based on '24e-25e EV/EBIT and P/E multiples.