RBC Capital has initiated coverage on Sartorius Stedim Biotech (DIM: FP) (OTC: SDMHF), a leading provider of bioprocessing tools, with an Outperform rating and a price target of EUR270.00.
The firm highlighted the company's strong position in a market that, despite normalizing post-COVID growth, continues to expand at a low double-digit rate. This growth is fueled by the high single-digit growth in antibody drugs and a robust 30% increase in the emerging cell and gene therapy market.
Sartorius Stedim, which holds approximately 13% of the market share, stands as the largest pure-play bioprocessing tools company. RBC Capital's assessment puts Sartorius Stedim in a favorable light due to its above-consensus forecasts.
Despite a history of management downgrading guidance, the firm anticipates that Sartorius Stedim will outperform consensus forecasts starting in 2025. The outlook is based on a recovery from weaker 2023-2024 comparisons and a resumption of normal buying patterns. RBC's forecasts for 2025 include sales figures that are 6% above consensus and an EBITDA margin of 150 basis points higher.
The firm also pointed out that Sartorius Stedim's stock has significantly underperformed compared to its peers over the last one and two years. The underperformance has led to the stock trading at the lower end of its historical multiple premium ranges.
Despite this, Sartorius Stedim demonstrated faster growth than all of its peers in its Q2 2024 results.
RBC Capital's analysis suggests that Sartorius Stedim is undervalued relative to its growth prospects. The company's revenue growth indicates that it is trading at a significant discount—around one-third lower than what peer multiples would imply.
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