Biohit renewed its strategy and targets until 2028

Translation: Original comment published in Finnish on 11/22/2023 at 7:22 pm EET

Biohit announced its renewed strategy for 2024-2028 on Wednesday. The main objective of the strategy is strong and profitable growth, which the company seeks both organically and through carefully considered acquisitions. The product portfolio remains essentially unchanged and the update did not include any surprises in this respect. The financial targets for the period are 15-20% annual growth and at least 10% EBIT. Compared to our forecasts, the strategy aims to achieve higher growth while lagging slightly on profitability. We will make moderate revisions to our forecasts soon after a more detailed analysis.

Financial targets focus on growth

Biohit targets annual growth of 15-20% in the strategy period (2023e: 13.2%) based on organic growth and carefully considered acquisitions. The EBIT target is at least 10% (2023e: 15.4 %). The market for diagnostics of the gastrointestinal tract that is most important for Biohit is expected to grow by 4.6% until 2030 (Markets & Markets), so achieving the targets requires much faster growth than the market. The strategy does not comment on the relationship between organic growth and acquisitions in more detail. The targets seem to focus on growth above profitability, as the company aims to grow faster than in recent history while maintaining the EBIT margin at the already achieved level of over 10%.

The product range remains largely unchanged

Biohit’s product range seems to remain as it is today. This means test products for the gastrointestinal tract of which the top product is still the GastroPanel® product range. Acetium® products that bind acetaldehyde, a compound that increases cancer risk, are also still included in the company's strategy. In our initiation of coverage report, we also considered abandoning Acetium® products a possibility, since as consumer products they differ somewhat from the tests mainly sold to professionals through distributors. However, Acetium® remaining in the strategy is not a big surprise. The company wants to be present in all relevant markets, either through distributors or subsidiaries. The company highlighted North and South America alongside the current strong regions of Europe and Asia as potential growth opportunities. The US is the largest single market for diagnostics, with typically attractive pricing, but also very fierce competition. In other respects, the strategy focuses on developing the product range based on customer needs, active sales work and attracting experts and investors.

Management Group tweaks related to sales and marketing

In connection with the strategy, Biohit also announced changes to the Management Group. The previous Director of Sales and Marketing was appointed Chief Commercial Officer, which is a new position in the company. The tasks include, for example, opening new markets and developing the business. The Managing Director of Biohit's highly successful UK subsidiary, is appointed Head of Global Sales and Marketing and member of the Management Group. He will also continue to lead the subsidiary. We believe, the changes reflect the geographical expansion defined in the strategy and the growing focus on sales and marketing in the company’s operations.

The strategy creates moderate revision needs to our forecasts

Our forecasts include lower growth and higher profitability compared to the targets. Preliminarily we see a need for moderate forecast adjustments concerning higher growth and slightly lower profitability. We will update our research soon after a more detailed assessment of the company’s situation and the market. Overall, we believe the needs for change are small.