Launch Of LIAISON PLEX And US Expansion Will Drive Future Market Penetration

Key Takeaways

• Expansion in U.S. and Chinese markets, along with new product launches, is expected to enhance growth and market penetration despite limited immediate impact in China.
  
• Pricing strategies to combat inflation and innovation in diagnostics segments are likely to maintain net margins and support long-term revenue growth.
  
• DiaSorin faces challenges from competitive pressures in China, revenue gaps from declining COVID-related sales, slow LTG growth, and macroeconomic and regulatory risks affecting performance.

Catalysts

Engages in development, manufacture, and distribution of immunodiagnostics and molecular diagnostics testing kits in Europe, North America, and internationally.

• The successful launch and subsequent positive reception of the LIAISON PLEX, along with the anticipated approval of additional blood culture panels and the filing of more products, are expected to drive growth in the Molecular Diagnostics segment, enhancing overall revenue.
  
• Expansion efforts in the U.S. hospital market, targeting 600 systems installed by the end of 2026, and a focus on Immunodiagnostic placements are projected to increase market penetration and drive revenue growth in key geographies.
  
• The implementation of a pricing program to counter inflationary effects is expected to maintain or improve net margins by ensuring price stability and potentially increasing profitability.
  
• The completion of clinical studies and anticipated filing for products such as LIAISON NES, in addition to an increase in multiplexing revenue including PLEX and VERIGENE, can foster revenue growth and support the company's ambition of capturing 10% market share.
  
• The expected regulatory approval and manufacturing of products in China are likely to open growth opportunities in the Chinese market by 2026, although any immediate impact might be limited. This strategy aims to stabilize and eventually increase revenue from this region.

DiaSorin Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming DiaSorin's revenue will grow by 8.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 15.9% today to 19.5% in 3 years time.
• Analysts expect earnings to reach €292.3 million (and earnings per share of €5.24) by about April 2028, up from €188.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.7x on those 2028 earnings, down from 28.1x today. This future PE is greater than the current PE for the GB Medical Equipment industry at 10.5x.
• Analysts expect the number of shares outstanding to grow by 0.99% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.23%, as per the Simply Wall St company report.

DiaSorin Future Earnings Per Share Growth

Risks

• The company continues to experience difficult situations in China due to tough competition from local competitors and regulatory challenges, which could impact future revenues from this important market.
  
• The expected decrease in COVID-related revenues, which accounted for a significant portion of sales in the past, may create a gap in the revenue stream if not compensated by growth in other segments.
  
• The LTG (Life Science and Technology Group) business, which is expected to grow slowly, has been impacted by unfavorable conditions in the Life Science sector, potentially affecting its overall revenue and earnings contribution.
  
• The potential challenges of regulatory approvals and market acceptance in launching new products like the LIAISON PLEX and LIAISON NES could pose risks to timely revenue realization and market penetration.
  
• The geopolitical tensions and macroeconomic pressures, as discussed, could impact exchange rates and, consequently, the financial performance given the company's exposure to currency fluctuations, particularly impacting revenues and operating margins.

Valuation

• The analysts have a consensus price target of €109.75 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 €125.0, 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 2028, revenues will be €1.5 billion, earnings will come to €292.3 million, and it would be trading on a PE ratio of 27.7x, assuming you use a discount rate of 10.2%.
• Given the current share price of €98.12, the analyst price target of €109.75 is 10.6% higher.
• 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.