From Globe & Mail this AMPositive upgrades all around.
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Desjardins Securities analyst Frederic Tremblay saw Savaria Corp.’s (
) fourth-quarter results as a “good way to end 2023,” calling the release “a nice appetizer whetting our appetite for more at next month’s investor day.”
After the bell on Wednesday, the Laval, Que.-based manufacturer of accessibility products reported quarterly revenue of $216.8-million, up 2 per cent year-over-year and above both Mr. Tremblay’s $216.5-million estimate and the consensus projection of $215.3-million. Adjusted EBITDA grew 5.4 per cent to $35.1-million, largely in line with expectations ($35.8-million and $35.4-million, respectively).
“Savaria’s organic top-line trajectory remained strong thanks to demand, pricing and cross-selling,” the analyst said. “Adjusted EBITDA of $35.1-million was consistent with expectations. Accessibility had a robust quarter, featuring 9.5-per-cent organic growth and margin expansion. Looking ahead, we believe the North American segment will continue to lead the way while Europe should continue to recover gradually.”
At its first-ever Investor Day event on April 9, Mr. Tremblay is expected incremental information about the company’s ongoing Savaria One improvement project, which he views as “a key lever for the company to reach its revenue and margin objectives, and for estimates/valuation to continue moving higher.”
“Our view remains that enhanced disclosures around this company-wide effort could increase the Street’s comfort on the constructive outlook at Savaria and, hence, potentially fuel upward forecast revisions,” he added. “We believe management will likely comment on the path to its previously stated adjusted EBITDA margin ambition of 20 per cent (vs 2025 consensus of 17.5 per cent).”
Raising his revenue and earnings expectations for fiscal 2024 and 2025, Mr. Tremblay increased his target for Savaria shares to $22.50 from $20.50, maintaining his “buy” rating. The average is $20.64.
“While our target multiple is currently aligned with the historical average, we see potential for the stock to warrant an above-average multiple in the future based on developments related to the Savaria One project (ie details at investor day, solid execution visible in subsequent quarterly results),” he conclude.
Elsewhere, other changes include:
* Scotia Capital’s Michael Doumet to $21.50 from $17 with a “sector outperform” rating.
“The $25 million to $30 million in costs associated with executing Savaria One was a negative surprise to investors. But — this shows SIS is putting its money where its mouth is,” said Mr. Doumet. “And more than before, we believe Savaria is more likely to achieve its Savaria One goal (EBITDA of $200-million). We remain somewhat cautious on the timing, but believe there is sufficient evidence to raise our estimates (and our valuation) to reflect favorable momentum from the initiatives (as well as the improved macro backdrop).
“In the end, SIS usually ‘gets there.’ As background for that statement, following the acquisitions of Garaventa and Handicare, SIS disappointed on the timing of achieving synergies, but ultimately exceeded on profit growth at a later point. Therefore, we understand investor caution on the Savaria One financial target. That said, we think there are several reasons to remain optimistic — (i) North America operations are humming, (ii) Europe is improving, (iii) Patient Care meaningfully improved, and (iv) having started Savaria One more than six months ago, management is seeing incremental evidence of the initiatives working (not to mention the company is planning its inaugural Investor Day). We would be buyers.”
* Stifel’s Justin Keywood to $23 from $25 with a “buy” rating.
“Our view of continued strong growth remains, consistent with Savaria’s target of $1-billion in sales by 2025, expected to be achieved organically,” said Mr. Keywood. “Secular strength continues with an aging population and preference among the older demographic to avoid nursing homes, where assisted lift solutions are likely needed. Savaria also has a history of meeting and exceeding long-term goals. The prospects for 20-per-cent EBITDA margins at $1-billion in sales is very compelling but does highlight work ahead. We also hold the view that if Savaria can achieve EBITDA margins at 18 per cent or half of the expansion goal, the stock should still re-rate considerably.”
* National Bank’s Zachary Evershed bumped his to $20.50 from $19.50 with an “outperform” rating.
“We rate SIS OP as we remain confident in its ability to capture share in a growing market benefiting from brisk demographic tailwinds,” said Mr. Evershed