Agfa FIRST LOOK - Light 4Q in Offset and DPC; FY23 profitability should recover

In 4Q22 Offset Solutions (will be sold in april'23) and several activities of DCP (Digital Print & Chemicals) continued to feel the impact of the weaker economic conditions. In the Radiology Solutions division, the medical film business started to recover from the impact of the COVID lockdowns in China. Although impacted by manufacturing inefficiencies and cost inflation, Agfa's 4Q22 REBIT was below our and CSS mainly because of Offset Solutions (not material as it will be sold). Also DPC REBIT-margin was below expectations while Radiology Solutions recovery is promising.
The sale of Agfa's Offset Solutions division to Aurelius Group, which is expected to close early April, should enable Agfa to increase the focus on its growth businesses. Agfa's 2023 priorities are the implementation of further price increases across is businesses, the reduction of costs related to its operating model initiatives, and to deliver growth in HealthCare IT, Zirfon and digital printing.
Although Agfa expects a recovery in profitability in FY23 versus FY22, we expect we will have to lower our FY23E forecasts and already reduce our Target Price to € 4.0 while maintaining our Buy rating.