(BFM Bourse) – The in vitro diagnostics specialist published half-yearly accounts better than expected, supported by the ramp-up of its core activities. This makes it possible to take over from sales linked to Covid, which are necessarily weaker.
Eurobio Scientific was among the big winners of the Covid-19 pandemic, so much so that its revenues had soared by 220% in 2020. But with the transformation of the pandemic into endemic, the complete catalog of Covid tests (PCR, antigen and serological) of the in vitro diagnostic specialist is de facto less sought after, leading to a logical drop in activity in 2022.
Caution was therefore required for the year 2023, which presented itself as “a year of transition” for Eurobio Scientific. However, the ex-Diaxonhit unveiled half-year accounts on Wednesday evening that were higher than expectations.
Between January and June, Eurobio Scientific generated a total turnover of 59.2 million euros, down 29% compared to the first half of 2022. The group was further penalized by a “colossal base effect” , recalls Corentin Marty, analyst in charge of the file at TP ICAP Midcap. During the same period of 2022, the group had still generated more than 40 million euros in sales linked to Covid activity, sales which are “now not significant” at the end of June 2023.
The GenDx advantage
Restated for this exceptional turnover linked to Covid, the group’s core business – or historical – activities (such as for example HLA tests which assess the compatibility between organ donors and recipients during transplants) have, on the other hand , increased by 37% over one year in published data, and 7% in organic data.
The progression in real data mainly includes the contribution of the Dutch GenDx, acquired on October 1, 2022 for 135 million euros. This “structuring” acquisition enabled a significant increase in turnover achieved with proprietary products, to 30% of Eurobio’s total sales compared to 18% of those in 2022 (excluding Covid-19).
Ebitda (gross operating profit) amounted to 13.4 million euros, reflecting a corresponding margin of 22.6% compared to 26 million euros (31.1% of turnover) in the first half-year 2022. However, this indicator is higher than the estimates of TP ICAP Midcap, the research office expected 10 million Ebitda at the end of June 2023. For comparison, Eurobio recalls that it showed in 2019, before the start of the pandemic, an Ebitda of 7 million euros representing 12% of turnover.
The adjusted net result shows “a decline comparable to that of EBITDA”, notes TP ICAP Midcap and amounts to 9.4 million euros compared to 20.6 million euros, a year earlier.
“While we took a more cautious scenario for the 2023 financial year last May, the half-year results turned out to be better than what we anticipated despite the Covid-19 base effect and especially the structuring of the group following the acquisition of GenDx”, underlines Corentin Marty.
A discount to play
This publication, which exceeds expectations, therefore pushes the TP ICAP Midcap analyst to raise his expectations in terms of profitability. It expects “an Ebitda of 24.3 million euros (19.7% of turnover) against 20.7 million euros (16.8% of turnover) including an additional structuring effort sales of the group in the second half of the year” for this “transition” exercise which aims to “purge the base effects linked to Covid-19 activity”.
The results revealed therefore show that Eurobio Scientific was more able to negotiate the post-pandemic period than other companies in the sector such as Eurofins Scientific. At the end of July, the analysis laboratory giant slightly lowered its forecasts for the current year after a fall of more than 50% in its net profit in the first half.
For the future, Corentin Mary estimates that the start of 2024 for Eurobio Scientifc will be strengthened by the integration of GenDx, (30% proprietary products and 35% international sales), an acquisition which, according to him , “still full of synergies, particularly in France”.
Above all, the group has the means to be active on the front of targeted acquisitions, with a view to “becoming a major international company in the specialty diagnostics market”. Eurobio drew partly on its significant cash flow (at 89 million euros at the end of June 2023) to acquire last July the Italian company DID, specializing in the distribution of in vitro diagnostic tests. The French group has thus entered one of the key markets in Europe, where it was not present directly.
In any case on the stock market, this half-yearly publication, which exceeds expectations and which illustrates the rise in power of “core” activities, is welcomed. Eurobio shares jumped another 11.6% to 14.50 euros around 3:30 p.m.
“With valuation multiples still attractive and a market capitalization lower than the group’s equity”, Corentin Marty reiterates his purchase recommendation but lowers his price target by one euro to 27 euros on the stock, in order to integrate “an update of its market parameters”. Despite this slight adjustment, this price target reflects an upside potential of 86% compared to the current price.
Sabrina Sadgui – ©2023 BFM Bourse
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