Probi - Partnership agenda bearing fruit

Recovery in EMEA supported by new product launches We raise ‘22e-‘23e sales after new partnerships 35x-30x EV/EBIT ‘21e-‘22e for 16% EBIT CAGR ’20-‘23e Impressive 20% organic growth with turnaround in EMEA Probi started 2021 on a strong note, with organic sales growth of 20% y-o-y that was above our expectations of 16%. While Americas (71% of Q1 sales) delivered 22% organic growth y-o-y, negative FX led to 6% reported growth with sales 3% below ABGSCe. EMEA (21% of Q1 sales) staged an impressive COVID-19 comeback and all-time high sales, growing 19% y-o-y (up 16pp vs. ABGSCe).

The region was supported by first deliveries under the recently announced pan-European agreement with Perrigo (Spain and Belgium, with 12 more countries expected). We note that Perrigo is a global consumer health player with ~USD 5bn in sales. The US factory disruption in Q1’20 created easy gross margin comparables, but the 43.4% gross margin in the quarter (up 4.4pp y-o-y) was still 2.6pp below ABGSCe.

However, solid cost control led to EBIT of SEK 30m and an EBIT margin of 17.6% in line with our estimates. Positive long-term outlook despite lumpy quarters ahead Management expects fluctuation between quarters in 2021, noting that several e-commerce customers had seen stock buildups. This lowers our expectations for Americas in Q2’21e (6% organic growth y-o-y), partly offset by healthy momentum in EMEA and APAC.

We expect first sales from the agreement with Sinopharm in H2’21 (one of China’s largest pharma companies with USD 70bn in sales). Management also highlighted that it intends to increase R&D investments. However, Probi remains committed to meet its financial targets for 2021 (e.g.

7% annual organic growth, an annualised EBITDA margin =29%). 35x EV/EBIT ’21e: ~30% above historical 2-year average Our positive revisions for EMEA and APAC are partly offset by the impact from FX and expected near-term US turbulence, leading to ~3% positive EBIT revisions in ‘21e-‘23e. Probi end....