bioMérieux 2012: Still some challenges ahead
Fair Value EUR62 vs. EUR65 (price EUR57.99) NEUTRAL
While 2011 figures delivered no surprises, 2012 EBIT guidance was clearly disappointing with the company forecasting a decrease in operating profitability this year. We are updating our model following this publication and now take more cautious estimates into account. Our new fair value stands at EUR62 vs. EUR65 previously, to reflect these changes.
No surprises in FY figures... 2011 was characterised by an increasing lack of visibility due to the global macroeconomic environment and budget constraints (1% negative impact according to the management). bioMérieux finally posted 4.1% in organic growth for the FY 2011 (vs. 4.9% a year earlier). EBIT of EUR258m, as expected, stood at the lower end of company 2011 guidance (EUR255-270m).
2012 EBIT guidance implies a further decline in operating profitability. The reasons behind the anticipated pressure on margins include: 1). lower top-line growth (between 3 to 5% organic); 2). an increase in SG&A and R&D expenditures in connection with the launch of a new generation of VIDAS and continued investments in 4 other platforms; 3). the creation of 2 new subsidiaries; 4). the continued implementation of the global ERP system; and 5). the integration of AES. All in all, we think the recovery in the margins might have to wait until after 2012.
New fair value: EUR62. We change our fair value to EUR62 from EUR65 per share. This takes into account our lowered estimates (5% normative top-line growth, 20% EBIT margin at maturity). Our WACC stands at 9.3% (Bryan Garnier’s new criteria).
Few catalysts before the launch of New Vidas in 2012. bioMérieux definitely has strong pillars of growth going forwards (particularly in microbiology and emerging countries) but macroeconomic difficulties at the beginning of 2012 should prevail. As a consequence, this lack of visibility provides few catalysts from earnings releases, in our opinion. The main catalyst in 2012 will be in H2 with the launch of the new VIDAS platform. At that time, the stock could benefit from more positive momentum, given several other platforms will be launched in the following months.