Getinge: the expert in critical devices in the hospital environment

Getinge the expert in critical devices in the hospital environment

The value of tomorrow is realized in partnership with

In Sweden, Getinge is both a village in the county of Halland and the company of the same name. It was founded there in 1904 to produce storage equipment for dairies. Over time, the activity slowly shifted towards the medical disinfection sector. More than half a century ago, the company built its reputation on automated washer-disinfectors for hospitals. Now it operates in three main segments. First, medical systems for operating rooms and intensive care which represent 54% of turnover in 2022 and cover respirators, monitoring monitors or cardiac assistance systems. The second division, which accounts for 32% of turnover, concerns surgical workflows, such as operating tables and instrument sterilizers. Finally, the life sciences branch (13% of revenues) offers sterile and disinfection solutions for laboratories and medical research.

Getinge is emerging from a painstaking but rather successful restructuring effort, which aimed to focus on its most promising businesses, that is to say the most dynamic and most profitable. The rest of the portfolio was split up and placed on the stock market under the Arjo banner. This refocusing coincided, fortuitously, with the explosion in the need for medical equipment caused by the Covid-19 pandemic. Actors with any know-how in the field of advanced medical equipment found themselves in a form of war economy, with urgent orders placed at any price, literally, by the authorities. This situation has of course boosted sales and profits.

Like other medical equipment suppliers, Getinge soared on the stock market as long as the world feared the virus. Before falling in 2022, when the Covid has demoted in the scale of concerns. To the credit of the Swedish company, it is nevertheless necessary to register a fairly good management of the peak of activity and the return to a rhythm more in line with industry standards. Other actors climbed very high before experiencing a serious air pocket. Getinge’s turnover should thus return this year to the record levels recorded in 2020: approximately 29.9 billion Swedish crowns, or some 2.6 billion euros. As for the operating margin, it is still lower than in 2020 (18.3%), but it remains durably higher than before the pandemic. It should rise from 14.5% in 2022 to 16.7% in 2025, if analysts’ expectations are confirmed.

In the future, sales should grow by 2 to 5% per year while margins will gradually increase. The accounts are easily readable, a sign that there are no tricks on the results. Free cash flow generation is strong and the balance sheet robust. These are good points in an uncertain economic context. Another strength of the company, recurring revenues represent a little more than half of the turnover. We are talking here about relatively captive sales because they relate to consumables, maintenance services or interventions on equipment already installed. More generally, valuation multiples have returned to acceptable levels after the excesses linked to the pandemic. The medtech sector still enjoys a substantial premium to the market average, but Getinge is somewhat at the bottom of the pack.

The only downside is that the management has been the victim of a certain instability in recent years, which no doubt partly explains the discount suffered by the share vis-à-vis its peers. The short-term outlook is relatively cautious, since managers have warned that the pressure on margins, observed at the end of 2022, will undoubtedly continue in the first half of 2023. This does not deprive this stock of its fundamental qualities, which make it a good defensive option in a portfolio.