MeMed, LIAISON PLEX, And Global Expansion Set To Boost Revenue And Earnings Growth

Key Takeaways

• Strong hospital strategy and new product offerings in the U.S. could drive significant revenue growth and new hospital additions.
  
• Expansion in non-European primary markets and new diagnostic tests are expected to contribute to sustained revenue and portfolio enhancement.
  
• DiaSorin faces challenges from local competition in China, pricing pressures, and reliance on risky new product adoption, impacting revenue and margin growth.

Catalysts

Engages in development, manufacture, and distribution of immunodiagnostics and molecular diagnostics testing kits in Europe, Africa, North America, Central and South America, the Asia Pacific, and China.

• DiaSorin's strong execution of its hospital strategy in the U.S. aims to add 100 new hospitals by year-end and 600 by 2027, driven by new product offerings like MeMed, supporting potential revenue growth.
  
• The launch and market acceptance of DiaSorin's LIAISON PLEX platform, with both fixed and flex technologies, could drive an increase in instrument placements and consumable sales, enhancing future earnings.
  
• Expansion in primary markets outside Europe and the U.S., like Australia and India, continues to show strong double-digit growth, which can contribute to sustained revenue increases.
  
• The development and anticipated regulatory approval of new diagnostic tests, such as LymeDetect and the Candida auris test, are expected to enhance DiaSorin's portfolio, which may lead to higher future revenues.
  
• Investments in operational efficiency and synergies from the Luminex acquisition are likely to maintain or improve net margins by managing operating expenses effectively, thus boosting earnings.

DiaSorin Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming DiaSorin's revenue will grow by 8.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 16.0% today to 19.2% in 3 years time.
• Analysts expect earnings to reach €289.1 million (and earnings per share of €5.14) by about December 2027, up from €188.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.0x on those 2027 earnings, down from 28.6x today. This future PE is lower than the current PE for the GB Medical Equipment industry at 36.0x.
• Analysts expect the number of shares outstanding to grow by 1.76% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.26%, as per the Simply Wall St company report.

DiaSorin Future Earnings Per Share Growth

Risks

• DiaSorin is facing challenges in China, where local companies are being favored, leading to declining sales amidst a competitive market and pricing pressures. This could impact future revenues and growth prospects in the region.
  
• In the LIAISON PLEX market, there is ongoing competition with other companies offering similar multiplexing solutions, which could lead to price pressures and potentially affect DiaSorin’s market share and margins.
  
• The softness in the life sciences market, particularly in instrument sales, may lead to stagnation in that segment, impacting overall revenue growth and margin performance.
  
• DiaSorin’s reliance on new product adoption, such as the MeMed and LIAISON PLEX, involves significant commercial investments and carries risks if market adoption is slower than anticipated, which could impact revenue projections.
  
• Volume-Based Procurement (VBP) in China, although currently not a large part of DiaSorin's numbers, represents a broader trend of pricing pressures in the diagnostics market, which could impact revenues and profit margins as this practice potentially expands to other products or markets.

Valuation

• The analysts have a consensus price target of €106.89 for DiaSorin based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €126.0, and the most bearish reporting a price target of just €82.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be €1.5 billion, earnings will come to €289.1 million, and it would be trading on a PE ratio of 27.0x, assuming you use a discount rate of 9.3%.
• Given the current share price of €101.25, the analyst's price target of €106.89 is 5.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.