M1 Kliniken AG
11.06.2018 - Equity Research Report (english) // buy
Research Report (Anno) - M1 Kliniken AG - english
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ISIN: DE000A0STSQ8
Branche: Biotechnologie-Pharma
Rating: buy
Kurs bei Erstellung in €: 15,60
Kursziel in €: 18,50
Mögl. Interessenskonflikt gem. §34b Abs.1 WpHG und FinAnv: 5a;11
Substantial increase in clinic locations implemented, financial year exceeds expectations, expansion course to be continued, new business areas to be developed
M1 Kliniken AG significantly expanded the number of locations in Germany from 13 to 19 in 2017, therefore exceeding its own growth plans. With the opening of six further locations in Leipzig, Wiesbaden, Münster, Berlin II, Mannheim and Berlin III, the basis for an increase in beauty treatments was expanded. The 150,000 beauty treatments completed in 2017 represent an increase of 50% compared to the previous year.
On this basis, sales revenue climbed by 31.3% to EUR 47.19 million (previous year: EUR 35.96 million). In our last year’s annual study (dated 11/05/2017), we had predicted the opening of five further centres in 2017 and forecasted revenue of EUR 43.69 million. Our former forecast was therefore exceeded. EBIT climbed by 31.0% to EUR 5.72 million (previous year: EUR 4.36 million) and therefore in proportion to the increase in sales. The EBIT margin of 12.1% (previous year: 12.1%) can be seen in particular against the backdrop of the current expansion phase, which is accompanied, for example, by a strong increase in workforce. In addition, new locations are in the typical ramp-up phase, which is characterised by a lower profitability level.
In the coming years, site expansion is to be continued. In the current financial year, two more clinics have already been opened in Munich and Frankfurt. According to our forecasts, there should be a total of 29 clinics in the M1 Group at the end of the financial year 2018. In the process, not only is a “re-densification” planned in Germany, but an international roll-out is also the focus of the corporate strategy. Specifically, new openings could initially be made in Austria in order to participate in the attractive market potential, which is similar to that in Germany.
Further revenue streams, such as the field of aesthetic dentistry covered since the first quarter of 2018, should provide additional momentum. Rapid integration of this new service into the existing clinic network should allow for fast expansion of this treatment. In addition, the company will continue to push the commercial sector for the higher-margin own-brands for the retail segment. To this effect, the roll-out of the B2C business took place at the beginning of 2018, which sees care products sold online and in specialist centres under the brand name M1 Select (m1-select.de).
On this basis, we expect the growth momentum to continue, as well as an expansion of the sales base over the coming financial years. In the current growth phase, which is expected to extend over the coming financial years, M1 Kliniken AG should be characterised by corresponding up-front investments. For the coming financial years, we therefore only forecast a constant development of the EBIT margin, which should stabilise between 12.2% (2018e) and 13.0% (2019e). After completion of the growth phase, higher EBIT margins are possible, which we have taken into account in our DCF valuation model.
As part of the DCF valuation model, the resulting fair value per share at the end of the 2018 financial year corresponds to the stock price target of EUR 18.50 (previously: EUR 16.15). The target price increase is a result of the first inclusion of the higher 2020 estimates as the basis for the continuity phase of the valuation model, as well as the roll-over effect. We continue to assign the BUY rating.
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