On Tuesday, Sartorius AG (SRT3:GR) (OTC: SARTF), a leading international pharmaceutical and laboratory equipment supplier, received an underperform rating from Bernstein SocGen Group, with a price target set at EUR199.00. The new coverage reflects skepticism about the company's future performance, particularly in terms of revenue growth and margin targets.
The analyst's report, which followed the Capital Markets Day (CMD) held in May, indicates that the event failed to provide convincing evidence of Sartorius AG's ability to meet its projected revenue trajectory or margin targets for the fiscal year 2028. The report highlights concerns over the bioprocessing subsidiary, Stedim's, revenue recovery pace and the lab products and services (LPS) division's negative impact on margins.
Bernstein SocGen's projections stand below the company's own targets for the fiscal year 2028, as well as below Bloomberg consensus, with estimates that are 6.9% lower for sales and 13.9% lower for earnings per share (EPS). The analysis points to several risks associated with Sartorius AG's strategy for 2028, particularly as the company approaches the end of its joint Heirship Agreement.
The report also notes the need for Sartorius AG to reduce capital expenditures to lower debt levels, which could potentially compromise the mid-term revenue trajectory of the bioprocessing segment (BPS) and limit the return on invested capital (ROIC) to mid-teens levels. This would be a decrease from the high teens levels seen before the COVID-19 pandemic.
Furthermore, while BPS's margin acceleration is expected to benefit from scaling effects, the report expresses concerns about the visibility of these effects in the mid-term, suggesting that Sartorius AG's ability to achieve its margin goals is currently uncertain. The underperform rating indicates that the firm's analysts are not confident in the company's ability to outperform the market or its sector in the near future.
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