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 Oct 18, 2024 8:41am

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Post# 36271261

TD Raises Target

EARNINGS UPDATE

RENEWED INTEREST IN SMID-CAPS SHOULD SUPPORT VALUATION; BUMPING TARGET TO C $30

THE TD COWEN INSIGHT

SIS is a defensive-growth name with both near-term (Savaria One) and strong secular growth drivers (aging population), and should benefit from rising valuations of quality SMID-cap companies.The stock is at an all-time high and up 54% YTD, but valuation remains low (trading below its pre-pandemic historical average of 12.5x forward cons EBITDA) despite ~16% forecasted EBITDA CAGR through 2026.

Impact: NEUTRAL

Savaria reports Q3/24 results on Nov 6 (details TBA). We raised our target valuation multiple range to 11-12x (up from 9-10x) reflecting renewed investor interests in quality SMID-cap companies (i.e., CGX, JWEL, KBL, PRMW), falling interest rates, and the strong financial outlook (benefits from Savaria One or S1). Rolling out valuation another quarter, our target increases to C$30 (from C$24). We made no changes to our estimates. Our Q3 forecasts reflect:

Revenue of C$221mm (+5% y/y, cons: C$223mm). Accessibility (+8% organic growth): We expect North America to lead the growth, driven by strong demand across residential and commercial sectors and a healthy backlog (12-18 months out as of August). In Europe,
we expect only modest revenue growth as management focuses on more profitable

sales (e.g., implemented discounting guardrails) which tempers near-term growth. That said, this impact should only be temporary, and we see ongoing S1 initiatives (e.g., cross- selling, innovation/new product introductions, updated pricing, and increased higher- margin reconditioned units, etc.) to contribute more meaningfully longer term. Patient Care (0% organic growth): While the comps are easier in 2H/24, given inherently lumpy sales and reduced government projects in 2024, we conservatively forecast flat sales y/y.
Adj. EBITDA of C$40.9mm (+19% y/y, cons: C$41.4mm). We forecast margin to expand ~210bps y/y, stemming from 1) volume-driven efficiencies from strong demand, share gains, cross-selling, and increased throughput; 2) benefits from the S1 project (i.e., improved profitability in Europe, better pricing, procurement savings, and production efficiencies); and 3) “onshoring” initiatives in Brampton and Mexico, which should deliver even more meaningful cost savings over time.
Strong FCF and balance sheet: SIS's balance sheet is already healthy at 1.88x leverage, with ~C$227mm in available cash and credit (which we believe position it well to execute on strategic initiatives and opportunistic M&A). With a robust 17% EBITDA growth in 2H/24, we expect the resulting FCF growth to enable SIS to further de-lever to ~1.5x by YE.