MedLife: and let the operational gearing begin (upgraded to BUY)

Following the 4Q24 earnings release, we have updated our 12M price target for MedLife to RON 7.1/share and upgraded our rating from Hold to BUY, with upside of c.20%. Last year was the inflection point for the EBITDA, growing 36% yoy. Below the EBITDA, these gains were largely offset by higher depreciation, interest expense and taxes; only c.20% of the upside made it to the bottom line. We expect that to reverse this year, on: 1) more modest growth in depreciation and taxes; and 2) a c.20% drop in financial expenses, meaning that, this year, c.80% of the group EBITDA should flow to the bottom line; we see the net profit growing over 3x yoy, to RON 86m. Since 2021, MedLife has converted c.95% of its EBITDA into cash from operations. Assuming that this remains the case, and a roughly flat capex spend vs. 2024, its gearing should reach 3.3x by the year-end (vs. 4x at end-2024) and approach 2x by 2027E, in our model.