Revenio Q2'24: Company progress on track

This report is a summary translation of the report “Yhtiö etenee aikataulussa” published on 8/8/2024 at 7:25 pm EEST.

We reiterate our Accumulate recommendation for Revenio and raise our target price to EUR 32.0 (was EUR 28.0). The company's revenue growth accelerated faster than we anticipated, and the Q2 operating result exceeded our expectations. The company has returned to profit growth as expected, and future growth drivers are developing promisingly, laying the foundation for profitable growth in the medium term as well. The share’s valuation (2025e, adj. EV/EBIT 20x) is no longer cheap, but we believe it is justified and the upside from the 2025 earnings growth gives a reason to stay on board.

Growth accelerated beyond our expectations on a broad front

Revenio’s revenue in Q2 grew by 14 % to 25.4 MEUR, clearly exceeding expectations. Growth was strongest in imaging devices (iCare DRSplus, COMPASS and EIDON), but there was also strong growth in tonometers (iCare IC200 and sensors). The recovery in demand for private equity-backed US opticians has not yet translated into significant orders, but there was a good inflow of replacement orders. The operating result was strong at 6.0 MEUR and clearly exceeded our expectations, even though the cost structure increased faster than expected. The reported operating profit was burdened by the write-off of the non-strategic Ventica (0.73 MEUR), which has no impact on cash flows or our view. Cash flows were ample and overall Revenio did what we expected in Q2: the company firmly returned to a path of earnings growth as demand recovered from its temporary dip. 

Future growth drivers look promising

Revenio's guidance was as expected for currency-adjusted revenue to grow by 5-10% and its profitability to be “at a good level” excluding non-recurring items in 2024. Our growth forecast (around +9%) is at the upper end of the range and we consider an increase in guidance possible if the good traction continues in the crucial Q4 (strong comparison period). Confidence in the outlook for the coming years was given by the fact that future growth drivers developed in line with expectations. The iCare ILLUME screening solution seems to be progressing better than expected (dozens of new customers have been won and, according to the company, the reception has been "extremely positive"), while the HOME2 reimbursement policy, the development of the new Maia microperimeter and other product development projects are on track. Based on the report, we have not made any material changes to our forecasts for the coming years. The ongoing FDA application in the US (iCare DRSplus + partner AI) was not updated in the report, but Revenio's own FDA application for the ILLUME solution is progressing as planned (FDA approval possibly in H2'25). We did not make any material forecast changes for the coming years after of the Q2 report, once we adjust for the Ventica write-off.

Earnings growth creates upside

Revenio’s earnings growth story is returning to its track during 2024, as expected, and the outlook for 2025 still looks very positive. Valuation has tightened since the stock's rise, but looking ahead to next year, we still find it quite attractive (2025e adj. EV/EBIT 20x). As the turnaround strengthens and visibility slowly improves, next year's earnings growth will also be easier to rely on. We consider the relative valuation to be neutral and believe that Revenio is one of the best companies in the group. Overall, we think that Revenio's valuation is currently moderate, but the company is no longer particularly cheap. However, now that the recovery in market demand is reflected in the numbers and the outlook for next year is very positive with several drivers supporting the company, we believe the risk/reward ratio of the stock remains attractive.