Looks like they are all increasing their targets. Added a few more at the open. GLTA
Savaria Corp.
(SIS-T) C$15.95
Savaria One Expected to Deliver This Year
Event
Following the Q4/23 conference call, we are lowering our 2024 adj. EBITDA estimate
by 1% but increasing our 2025 estimate by 10%, primarily reflecting more modest
Patient Care growth assumptions in 2024, our increased confidence in the 20%
margin target for 2025, and back-end weighted Savaria One benefits. Consequently,
our target increases to $21 (from $20).
Impact: NEUTRAL
Not surprisingly, Savaria's shares are down in early trading (-5%) given the softer
results and the strong share price performance in the lead up to Q4. That said,
absent the incremental costs tied to Savaria One (where the benefits have not begun
to offset expenses) and tougher y/y comparables in the Patient Care segment, we
argue that the overall business fundamentals and outlook are healthy. Our forecasts
reflect:
Robust organic revenue growth: 1) strong residential and commercial demand
across segments supported by significant backlogs; 2) further cross-selling
synergies from the Handicare integration and benefits targeted by Savaria
One (we expect more details on the company's April 9 Investor Day); and 3)
market share gains. We expect these to drive ~10.5%/4.5% organic growth in
Accessibility/Patient Care in 2024, and ~8.0% for both segments in 2025.
Consolidated adj. EBITDA margin expansion (~160bps/280bps in 2024/2025)
driven by: 1) pricing and vendor diversification; 2) volume-driven efficiencies (i.e.,
higher throughput, cross-selling, and share gains); and 3) “on-shoring” initiatives
in Brampton (began production of second Handicare stairlift) and Mexico (started
shipments to Vancouver), which should deliver more meaningful cost savings over
time, in our view. Longer-term, we also see potential savings arising out of the
Savaria One initiative focusing on operational (i.e., procurement and production)
and sales excellence. Similar to our sales forecasts, we assume that the path to
20% EBITDA margin is more back-end loaded (i.e., ~35%/65% in 2024/2025).
Stronger balance sheet (2.07x leverage) positions SIS well to execute on
strategic initiatives and opportunistic M&A.
TD Investment Conclusion
We expect the strong balance sheet, backlog conversion, synergies, and execution
on its initiatives to generate ~20% EBITDA CAGR through 2025. This should, helped
by a return to favor for small cap stocks, push the stock price closer to our $21 target