MedLife confirmed at BUY, TP RON 45 - Just a gap year in growth
Following 2Q 20 results, our take is that 2020e could bring only a pause in MedLifes double-digit growth pace. In our view, clinics could still help the top line to grow this year, as the management stated that revenues are coming closer to the pre-Covid budgeted levels in recent months. However, the silver lining during the lockdown was that MedLifes business model proved flexible enough to preserve and even to improve margins. Half of MedLifes costs are directly linked to the trend in revenues, i.e. revenues sharing agreements with partner doctors and consumables, and the adjusted EBITDA margin (excluding IFRS 16 impact) already gained almost 100 bps yoy in 1H 20. Moreover, we expect the normalization of activity throughout next year, and MedLifes focus on imaging and oncology, to push the margin up by more than 100 bps in 2021e towards 14%. This unwelcomed stress test has improved significantly our outlook on margins, and we are now quite bullish despite the rally seen in recent months. Looking at relative valuation, current implied EV/EBITDA multiples imply a discount of up to 30% to European peers. Thus, we maintain our BUY recommendation for MedLife, with a 12m TP of RON 45 (RON 42).
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