Goldman Sachs Initiates Stedim Shares at “Buy,” Projects Over 20% Upside Potential

Goldman Sachs has commenced coverage of Sartorius Stedim Biotech with a “buy” rating, setting a 12-month price target of €225, indicating an upside potential of approximately 22%.

This positive outlook is supported by the company’s favorable position in the bioprocessing market and a more attractive valuation compared to its parent company, Sartorius AG. Analysts note that Sartorius Stedim, characterized by a stronger business mix, lower leverage, and enhanced growth prospects, is well-placed to benefit from the gradual recovery of the bioprocessing sector.

The bioprocessing industry has experienced significant volatility in recent years due to destocking trends following the COVID-19 pandemic, which particularly impacted Sartorius Stedim’s shares, causing a decline of 65% from their peak in October 2021. Despite this, Goldman Sachs anticipates a rebound as the market stabilizes and growth returns to more normalized patterns.

The analysts express their long-term confidence in the bioprocessing market’s dynamics and view Sartorius Stedim as positioned to deliver compounding returns as the single-use market normalizes.

A key factor in the positive outlook is the adjustment of earnings expectations for Stedim after a pandemic-driven surge, during which the company benefitted from its involvement in vaccine and therapeutic production. As these temporary advantages diminished, destocking in the industry created challenges for revenue and profitability. Nevertheless, Goldman Sachs believes that earnings have been sufficiently realigned to indicate a more sustainable growth trajectory, with 2025 expected to mark the onset of a broader recovery.

From a valuation perspective, Sartorius Stedim presents an appealing investment opportunity compared to Sartorius AG. Although both companies exhibit similar EV/EBITDA multiples for 2025 (around 23.6x for Stedim versus 23.8x for Sartorius AG), Stedim showcases a stronger growth profile, better margins, and lower financial leverage. This combination renders Stedim a more attractive choice for investors looking to benefit from the bioprocessing industry’s recovery. The company’s leverage ratio is projected to decrease from 2.9x net debt/EBITDA at the end of 2024 to 0.6x by 2028, further enhancing its financial standing.

The bioprocessing market’s long-term outlook remains strong, bolstered by structural growth factors like the rising global demand for biologic drugs. Sartorius Stedim, with its robust presence in single-use bioreactors and other bioprocessing tools, is poised to capture a significant share of this expanding market.

Goldman Sachs’ analysis of order book dynamics and anticipated revenue recovery indicates that destocking may affect Sartorius until around mid-2025, particularly in the filtration segment. Overall, the revenue growth outlook is promising, with expectations of a return to double-digit growth in the years following 2025.

The analysts also highlight that while the company’s recovery is expected to be gradual, there are potential upside risks to current consensus estimates beyond 2025. Their projections for revenue and EBITDA in 2026 and later are slightly above consensus, driven by expectations of improved market conditions and potential operational efficiencies.

Additionally, the analysts note that while the book-to-bill ratio may remain below 1 until 2026, this should not be interpreted as weak growth, but rather as a process of clearing backlogs of orders accumulated during the pandemic.