Sartorius AG (Prefer
SRT3
Delayed Frankfurt - 12/15 05:35:30 pm
82.34EUR
+0.94%

German pharma-supplier combining growth and profitability

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03/17/2017 | 09:23 am

Sartorius is a leading international pharmaceutical and laboratory equipment supplier with projected annual revenue growth of between 8% and 12%. The company comprises two divisions: Bioprocess Solutions & Lab Products and Services.

Sartorius’ innovative products and services are helping customers across the entire globe to implement their often complex biomanufacturing and laboratory processes.

The Group companies are united under the roof of Sartorius AG, which is listed on the Frankfurt Stock Exchange and holds the majority stake (74%) in Sartorius Stedim Biotech S.A. Quoted on the Paris Stock Exchange, this subgroup is comprised mainly of the Bioprocess Solutions Division.

With about 50 sites (19 of which are production facilities) employing 6.900 people
in more than 30 countries Sartorius is a global player. Its products are available in more than 110 countries. The company is run from the global headquarter in Göttingen, Germany.
Sales are well diversified geographically as shown by the following graph.



The growth prospects for Sartorius’ profit are excellent benefitting from three principal growth drivers:

- Strong overall market growth in bioprocessing and to a lesser degree pharmaceuticals
- Market share gains, particularly in the Americas
- Economies of scale

Background Information

To put it in a nutshell, Sartorius seeks to pave the way for researchers and scientists to focus on their ideas and innovations. To this end, Sartorius has created a very broad product offering providing clients with a one-stop shop solution. In its lab products and services category, products are grouped as follows: weighing, quality control, lab water purification, liquid handling, cell cultivation, filtration and purification.
The Bioprocess Solutions Divisions comprises five product groups: Filtration and purification, process control, fluid management, media and buffers, fermentation and cell culture.
Altogether, the company offers hundreds of different kinds of equipment.



Investment Case

The investment case for Sartorius is straight-forward. The company is firing on all cylinders. Thanks to the above-mentioned growth drivers, Sartorius’ revenue is forecast to progress at a low double digit percentage rate for the foreseeable future while the bottom line is expected to grow even faster as a consequence of the realization of economies of scale. Already, Sartorius is highly profitable as evidenced by a ROE of 22%.

The following list sums up the key points of our investment case:

➢ Buoyant revenue and earnings growth
➢ Very strong profitability which continues to improve



➢ Sartorius’ extremely broad product portfolio provides a one-stop shop solution thereby cutting out potential competitors
➢ Long-term strategic approach as evidenced by significant investment in R&D

Valuation

At the current share price, the company is fairly priced in our view. Investors have priced in the growth rates the company is expecting to see over the next couple of years. However, the analysts at Commerzbank see more value in the stock at the current price level. On 8 March 2017, Commerzbank increased its price target for Sartorius from 72 Euro to 90 Euro with the analyst Daniel Wendorff arguing that the acquisition of US company Essen BioScience would boost growth significantly.
In any case long-term investors should seize the opportunity to establish a position in the stock whenever a material pullback in Sartorius’ stock price occurs.

Ulrich Ebensperger
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