Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on EUROFINS SCIENTIFIC. We currently have 2 research reports from 1 professional analysts.
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Strong top-line growth but margin progression remains slow
23 Mar 17
Eurofins Scientific ended FY 16 on a strong note (highest organic growth since 2008), although investors accustomed to a guidance beat (the company has historically reported above guidance results) were disappointed with the ‘in-line’ results – the stock slumped c.6% immediately post the announcement, before partially recovering to close down 2%. Revenue was up 30% yoy to €2.5bn, in line with our estimate. The growth of 30% was a mix of organic growth of 9% and acquisition growth of 21% (forex had a negligible impact). Geographically, all regions reported robust growth. North America grew 25% (high single-digit organic growth), led by market share gains, while France rose 69% (organic growth of c.5%), benefiting from acquisitions. The UK, Germany and Benelux all recorded double-digit growth. The company-defined adjusted EBITDA increased 33% to €480m (the margin improved 41bp to 18.9%), but came in below our expectation of €491m. Net income jumped 97% to €178m, mainly due to higher financial income (related to derivative instruments) and a lower effective tax rate. The company announced a dividend of €2 per share (+38%). Management confirmed its FY 17 guidance (at CER) of revenue of €2.9bn and adjusted EBITDA of €550m. The revenue guidance assumes an organic growth of 5% along with a €200m contribution from acquisitions.
Initiating coverage on Eurofins Scientific.
25 Oct 16
Recommendation and upside: We are initiating coverage on Eurofins Scientific (market cap. of c.€7.2bn and a float of c.58%) with a Reduce recommendation and a target price of €393 (c.8% downside). While we acknowledge the company’s dominant position in the attractive bioanalytical industry, its robust growth prospects, superior technical know-how and its successful value accretive M&A history, we believe the current share price (saw a rally of c.26% over the last three months, primarily fuelled by solid H1 16 results and full-year guidance upgrade) fully discounts all these positives. It currently trades at a 2016E EV/EBIT of c.28x (vs. 22x of SGS and 17x of Bureau Veritas), making the valuation highly demanding. Business: Eurofins Scientific operates in the €130bn global Testing, Inspection, and Certification (TIC) market (of which c.45% is outsourced), with a presence across 39 countries. It employs a total workforce of c.25k people across c.250 laboratories and offers c.130k tests/ methods to evaluate the identity, composition, safety and purity of biological products. Unlike SGS, Bureau Veritas and Intertek (the big three in the industry), which cater to diverse industries, Eurofins focuses on the niche bioanalytical testing market (outsourced market size of c.€12bn) consisting of three sub-segments – Food & Feed testing (market size: €2-3bn; market share: c.30%), Pharma/Biotech testing (market size: c.€5bn; markets share: c.10%) and Environment testing (market size: c.€4bn; market share: c.7%), all of which offer stable and strong growth prospects (in the mid single-digit range), mainly driven by the expansion and tightening of regulations, the growing demand for improved safety and quality of food and environment, the increasing trend towards outsourcing, a burgeoning middle class and rising demand in emerging markets. In addition, it has forayed into the c.€160bn clinical diagnostics space in 2014 through the acquisition of Viracor IBT and, since then, has made aggressive strides into this area with the help of several more acquisitions. Need to know: The bioanalytical testing industry is characterised by a number of small regional players, often operating with very low margins, providing excellent opportunities for consolidation by the handful of global players. Over the years, Eurofins has shown great acumen of identifying targets at a reasonable price, successfully integrating them into its group structure and improving profitability of these acquired companies. This has driven the strong growth in both the top-line and the bottom-line, thereby creating value for its shareholders. These acquisitions have also expanded Eurofins’s geographical reach, technological base and product offerings, helping it to become a leading player in the industry (#1 or #2 position in most businesses/countries in which it operates). This aggressive acquisition strategy, however, has come at the expense of its cash generation capabilities. The situation is exacerbated by the fact that unlike SGS, Bureau Veritas and Intertek Group, Eurofins’ business model is more capital intensive (capex is c.8% of sales vs 3-6% for the big three) given its focus on laboratory testing (requires significant capex), with negligible exposure to certification or inspection businesses (which require lesser capex). This is evident in the cash flow examination of the company – while the company has been able to convert c.80% of EBITDA into operating cash flow (over 2011-15), the FCF/EBITDA conversion is decidedly grimmer (average of c.20% over 2011-15). Eurofins’ share capital is primarily held by the founding (Martin) family, through a holding company, Analytical Bioventures, which owns 41.7% of the group’s share capital and 58.5% of the total voting rights, effectively controlling the company. The family remains involved in the day-to-day operations and the long-term strategy execution, as evidenced by their strong representation on the company’s board – three of the five board members belong to the Martin family (Gilles Martin himself, his brother Yves-Loïc Martin and their sister Valerie Hanote).
20 Apr 17
Although the last two months have seen a broadly neutral performance from the UK healthcare sector compared to a significantly more volatile 6 months prior, we continue to expect macro-events and increased geo-political risk to result in an overall neutral performance from the sector over the next period. However, company specific news is likely to drive a strong outperformance from selected mid-market companies. We retain our neutral sector stance whilst highlighting those we expect to outperform.
N+1 Singer - Morning Song 24-04-2017
24 Apr 17
First Derivatives (FDP LN) FY slightly ahead as strong trading momentum continues | Goals Soccer Centres (GOAL LN) A potentially exciting corporate development | mporium Group (MPM LN) 2016 results: course set for exciting 2017 | Vectura Group (VEC LN) VR315 risk outweighs longer-term potential
Positive top-line results in first iclaprim phase III clinical trial (REVIVE-1)
18 Apr 17
Motif Bio (LSE: MTFB, NASDAQ: MTFB), a late clinical stage antibiotic development company, announced positive results this morning in the first of its two iclaprim phase III clinical trials, REVIVE-1, comparing iclaprim to vancomycin in the treatment of acute bacterial skin and skin structure infections (ABSSSI). Iclaprim, a next-generation antibiotic targeting an underutilised mechanism of action which causes rapid killing of bacteria, is being developed for the treatment of serious and life threatening bacterial infections. On the key primary endpoint in the study, early clinical response at 48-72 hours after drug treatment began, 80.9% of patients on iclaprim achieved a positive response compared to 81.0% of patients on vancomycin, well within the 10% non-inferiority margin required by the FDA. Iclaprim was also shown to be safe and well-tolerated compared to vancomycin. With these positive results from REVIVE-1 we have increased the probability of success for the iclaprim development program from 65% to 75% raising our risk-adjusted NPV for Motif Bio to almost £240m or 122p per share (previously £210m and 107p per share).
N+1 Singer - Sinclair Pharma - EBITDA upgrade for 2017, but lower TP due to warranty claim and costs
19 Apr 17
We have updated product-level forecasts and included the £10m SVB debt facility and £5m warranty claim settlement with Alliance Pharma in our forecasts. The 6.3% upgrade to our FY2017 sales estimate (from £46.0m to £48.9m) brings expected EBITDA profitability forward by one year (to FY2017 from FY2018). We remain positive on the ongoing rollout of Silhouette Instalift® in particular and retain our Buy recommendation. However, higher expected sales & marketing costs and the warranty claim weigh on our valuation: we downgrade our target price from 42p to 37p.
24 Apr 17
Lok’nStore* (LOK): Growth supported by a strong balance sheet (CORP) | Mortice* (MORT): UK acquisition (CORP) | Avacta* (AVCT): Another milestone – 1st non-therapeutics licence (CORP) | Petra Diamonds (PDF): Trading update and Q3 results (BUY) | Nasstar* (NASA): Growth and margin focus (CORP)