SARTORIUS PREF / SARTORIUS STEDIM BIOTECH : Corporate contact: Key takeaways

Research evidence excerpt

SARTORIUS PREF / SARTORIUS STEDIM BIOTECH : Corporate contact: Key takeaways

Refinitiv

Investment case, valuation and risks

Sartorius Pref (Outperform, Target Price EUR260)

Investment case

Sartorius AG is the parent company of Sartorius Stedim Biotech, in which it holds a

71.5% stake (fully consolidated). Through its acquisition of Stedim in 2007, the group

has emerged as the only large pure-play bioprocessing vendor. We believe its portfolio

of bioprocessing solutions (BPS division) is well positioned to benefit from the growing

biopharma market and increased use of single-use solutions. With the Covid-19 unwind

almost behind us, strong market fundamentals and destocking should enable the group

to continue to outperform the bioprocessing market. Given improving biotech funding

trends and equipment demand backed by KOL channel checks, the performance drag

due to the group's higher early-stage drug development exposure (c40% vs Stedim at

c25%) should ease going forward.

Valuation methodology

Our TP is based on our target equity value of Sartorius Stedim Biotech and peers'

EV/EBITDA multiples for the Lab Products & Services division.

Risks

To the upside:

Faster adoption of single-use technologies; fading destocking pressures; improving

customer investment behaviour; increased clinical activity/improved biotech funding;

increased pace of innovation (internal or acquired) enabling price premium to be

maintained; increased synergies between the BPS and LPS divisions.

To the downside:

Biotech funding weakness, pricing pressure on single-use technologies and increasingly

competitive auction processes could impact the growth profile, partly relying on M&A;

sub-scaled LPS division; susceptible to sector rotation (to value and/or cyclical) as sector