Lab Automation Risks May Dominate Near Term Yet Long Term Prospects Appear Promising

Catalysts

About BICO Group

BICO Group delivers software-centered lab automation and life science tools that help pharma and biotech companies run faster, more efficient research and development.

What are the underlying business or industry changes driving this perspective?

• Demand for integrated lab automation is structurally supported by the need to shorten drug development timelines. However, extended sales cycles and reliance on large project wins may cause uneven order intake and volatile Lab Automation revenue growth.
• AI-enabled experiment design and data orchestration put BICO at the center of digital drug discovery workflows. At the same time, the heavy up-front hardware and services component in projects risks depressing net margins if utilization and implementation efficiency do not improve as targeted.
• Pharma and biotech customers are steadily increasing automation budgets to cope with talent shortages and cost pressure. However, BICO's consulting-intensive delivery model in Biosero could cap operating leverage and limit EBITDA margin expansion if project standardization efforts stall.
• A growing installed base of Green Button Go–ready instruments and automation components can support higher recurring software, service and consumables revenue. Slow adoption of new commercial concepts with shorter lead times, though, may delay the shift to more resilient, higher-margin earnings.
• The streamlined BICO 2.0 portfolio and strengthened balance sheet position the company to invest in its 2026 product pipeline. Any failure to convert upcoming launches into cross–business area workflow wins could restrain the targeted 10 percent CAGR and thereby constrain long-term earnings growth.

Assumptions

This narrative explores a more pessimistic perspective on BICO Group compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming BICO Group's revenue will remain fairly flat over the next 3 years.
• The bearish analysts are not forecasting that BICO Group will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate BICO Group's profit margin will increase from -70.5% to the average SE Life Sciences industry of 11.1% in 3 years.
• If BICO Group's profit margin were to converge on the industry average, you could expect earnings to reach SEK 198.2 million (and earnings per share of SEK 2.81) by about December 2028, up from SEK -1.3 billion today.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 13.4x on those 2028 earnings, up from -1.1x today. This future PE is lower than the current PE for the SE Life Sciences industry at 55.6x.
• The bearish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.72%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent funding constraints in academic and biotech markets, especially in North America, could prolong cautious customer spending and extended sales cycles, limiting the pace of Lab Automation adoption and constraining revenue growth and earnings over several years.
• The Biosero business model requires large up-front hardware purchases and significant operational resources at the start of projects. If utilization and delivery efficiency do not improve as planned, revenue will remain volatile and net margins and EBITDA margins could stay structurally low.
• The SEK 1,036 million impairments in Discover ECHO and Biosero, driven by lower trading and reduced growth assumptions, indicate that previous expectations were too ambitious and that long-term growth and profitability may fall short of the targeted 10 percent CAGR, pressuring future earnings.
• BICO is investing heavily in an R&D pipeline with multiple product launches planned for 2026. A more conservative capitalization policy and the risk that new offerings fail to gain broad workflow adoption could dampen the return on these investments and weigh on long-term net margins and earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for BICO Group is SEK30.0, which represents up to two standard deviations below the consensus price target of SEK34.0. This valuation is based on what can be assumed as the expectations of BICO Group's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK40.0, and the most bearish reporting a price target of just SEK30.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be SEK1.8 billion, earnings will come to SEK198.2 million, and it would be trading on a PE ratio of 13.4x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of SEK19.88, the analyst price target of SEK30.0 is 33.7% 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.