Biohit H1 on Wednesday: Looking East

Translation: Original comment published in Finnish on 8/4/2023 at 7:07 am EEST

Biohit will release its H1 report on Wednesday August 8 at 9:30 am EEST. We expect revenue of EUR 5.8 million and EBIT of EUR 0.8 million, driven especially by the multi-year China distribution agreement renewed last year. Interest is also directed at information on the sales of Gastropanel® products, and especially the new fingerprick test, and its outlook after last year’s supply chain challenges.

Distribution in China is the main component of revenue

 Our H1 revenue forecast is EUR 5.8 million, which relies especially on the income from the distribution agreement in China that was renewed last year remaining on a good level. We expect a slight decrease from the comparison period (6.1 MEUR) due to possible positive non-recurring items in the comparison period related to the renewal of the distribution agreement. Our expectations are conservative due to low visibility, so positive surprises in terms of revenue are also possible. Next to the figures, we are also interested in possible further information on the development of demand for the Gastropanel® quick test, in particular, and the situation concerning the supply chain challenges that plagued the company last year.

 We expect the healthy profitability achieved last year to continue

 Our EBIT estimate is EUR 0.8 million, which corresponds to a decrease of EUR 0.5 million from the comparison period. We expect pressure on EBIT due to slightly lower revenue and higher costs than in the comparison period. Biohit did not have capitalized development costs of new products in its balance sheet according to the 2022 financial statements. However, the company has referred to capitalization in the future. We estimate that capitalizations could reduce costs in the income statement and thus lead to better reported EBIT. However, the capitalization has no cash flow effect and possible capitalization would decrease EBIT in the longer term as a result of increasing depreciation. We monitor the development of capitalization with interest, as they can have a significant impact on reported EBIT.

 The company has been brief about the outlook so far

 Biohit’s guidance for 2023 is that EBIT will grow from EUR 1.1 million last year. Our EUR 1.2 million estimate is therefore in line with the guidance. The company has not provided any guidance concerning 2023 EBIT or development in the coming years. The visibility of business development is low. In addition to a possible outlook in the H1 report, we look forward to the company’s strategy update that will be completed during fall and that could open Biohit’s medium- and long-term targets in more detail.