Bernstein upgrades Sartorius to “outperform” on margin recovery, pharma demand

Investing.com -- Sartorius AG (F:SATG) has been upgraded to “outperform” from “market perform” by analysts at Bernstein, citing a renewed margin expansion trajectory and signs of an upturn in pharmaceutical capital spending, in a note dated Mondau. 

The analysts have set a new price target of €272, up from the previous €266, reflecting increased confidence in the company’s financial outlook.

The core of the upgrade centers on the improving performance of the BioProcess Solutions (BPS) division, which accounts for the bulk of Sartorius’s revenue and earnings. 

BPS, responsible for 80% of revenues and 83% of EBITDA, recorded an 8.8% increase in half-year sales and a 240 basis point rise in margin. 

The EBITDA margin for BPS reached 31.7% in the second quarter, a year-on-year increase of 309 basis points and above the 30.8% consensus, signaling stronger profitability driven by a more favorable product mix and ongoing cost efficiencies.

Bernstein sees Sartorius returning to a 34% group EBITDA margin by 2028, a target previously considered unlikely. 

The analysts now forecast annual margin accretion of 136 basis points, narrowing the gap with the company’s guidance of 150 basis points per year. 

They also highlight the resilience of BPS margins in the face of emerging headwinds such as tariffs and foreign exchange pressures.

The valuation reset is also a factor in the revised rating. Sartorius currently trades at a 31% discount to its five-year average 12-month forward P/E of 51.8x. 

At Bernstein’s new €272 price target, the company would trade at 44x 2026 earnings, still below its historical average. 

According to Bernstein, this pricing suggests that the stock is overly discounted given its expected earnings growth of 21.5% through 2029.

The analysts note that Sartorius’s shift from equipment toward consumables has enhanced its margin profile and recurring revenue stream. 

Recurring revenues now comprise approximately 79% of total business, up from an estimated 60% in 2016. 

This transition has contributed to more stable financial performance and is expected to support continued margin expansion.

While the Lab Products & Services (LPS) division remains weaker, Bernstein points to stabilization and emerging contributions from recent acquisitions such as MaTeK, which could help offset the equipment slowdown. 

The EBIT margin in LPS was 22% in the first half, with expectations of slight improvement driven by increased consumables sales.

Bernstein analysts also view sector-wide developments positively. They cite signs of recovery in biomanufacturing orders and easing conditions in China and early-stage biotech, areas that had previously weighed on Sartorius’s performance. 

These trends, alongside commentary from industry peers like Lonza and Danaher (NYSE:DHR), reinforce Bernstein’s view that the sector is entering a recovery phase.

Despite short-term risks tied to tariffs and macroeconomic uncertainty, Bernstein considers the underlying trends supportive. 

Tariff-related impacts were minimal in the second quarter and are expected to affect full-year margins by 30–40 basis points. 

The company has initiated mitigation strategies, including localizing more production and passing surcharges on to U.S. customers.

Sartorius’s guidance for 2025 remains unchanged, and Bernstein’s forecasts are largely aligned with it. 

The brokerage expects 2025 revenue of €3.55 billion and an EBITDA margin of 30%. Diluted EPS is projected at €5.01, compared to €4.06 in 2024.