Savaria Corp T.SIS

Alternate Symbol(s): SISXF

Industrials

Savaria Corporation is a Canada-based company engaged in the accessibility industry. The Company provides accessibility solutions for the physically challenged to increase their comfort, their mobility and their independence. Its segments include Accessibility and Patient Care. It designs, manufactures, distributes and installs accessibility equipment, such as stairlifts for straight and curved stairs, vertical and inclined wheelchair lifts and elevators for home and commercial use. It also manufactures and markets a comprehensive selection of pressure management products for the medical market, medical beds for the long-term care market, as well as an extensive line of medical equipment and solutions for the safe handling of patients, including ceiling lifts and slings. It operates a sales network of dealers worldwide and direct sales offices in North America, Europe (United Kingdom, The Netherlands, Switzerland, Italy, Germany, Poland and Czech Republic), Australia and China.

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Savaria Corp

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Post by retiredcfon Mar 17, 2023 8:47am

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Post# 35344504

TD 2

Savaria Corp.

(SIS-T) C$16.41

On Track for Another Solid Year in 2023 Event

Following Q4/22 conference call, we lowered our 2023/2024 revenue and adj. EBITDA by 3% and 2%, respectively, mostly reflecting the sale of Savaria's Norway vehicle adaptation business and adjusting Patient Care growth expectations as it laps pandemic-related pent-up demand. Our $20.00 target price is unchanged.

Impact: NEUTRAL

We maintain our positive outlook for 2023, which includes:

Sustainable, strong organic revenue growth of ~9%/10% in Accessibility/ Patient Care, mostly driven by volume growth from: 1) a significant and still growing Accessibility backlog (+5% from Q3/22 due to strong home elevator demand); 2) more meaningful cross-selling synergies (and new contract wins) from the Handicare integration; and 3) market share gains from increased sales efforts. We expect price increases to contribute, albeit to a lesser degree.
Consolidated adj. EBITDA margin expansion of ~80bps, driven by: 1) modest price increases (to be reflected more meaningfully starting Q2) and alternative vendors to offset supply chain inflation; 2) operating efficiencies from higher volume stemming from cross-selling and market share gains, and Handicare integration (i.e., consolidated manufacturing); 3) moderating supply chain and FX pressures on the cost of goods (i.e., container freight from Asia to North America has already fallen back to pre-pandemic levels); and 4) "on-shoring" initiatives: Since the Brampton plant commenced production of Handicare's free- curve stair lift in early 2022, Savaria has been able to reduce its North America order lead time from six to two weeks (now targeting one week). The company is also bringing a second Handicare product to Brampton in May 2023. Meanwhile, the Mexico sub-assembly plant is ramping up production and has started shipping to the U.S. All of this should deliver cost savings, more meaningfully longer-term.

Overall, we are forecasting adj. EBITDA to grow 11% in 2023, which should drive strong free cash flow generation and in turn reduce leverage to ~2.5x by Q4/23.

TD Investment Conclusion

Savaria shares are trading at ~10.4x forward consensus EBITDA, a sizeable discount to its two-/five-year average of 11.5x/12.1x. We believe the shares are undervalued for a company executing this well, is deleveraging, and is expected to generate ~12% CAGR in EBITDA over the next two years.