Goldman Sachs Initiates Coverage on Sartorius Stedim Biotech

Goldman Sachs has initiated coverage of Sartorius Stedim Biotech (EPA:STDM) with a “buy” rating, highlighting a 12-month price target of €225, reflecting an upside potential of about 22%.

This optimistic outlook is supported by the company’s favorable positioning within the bioprocessing market and a more attractive valuation compared to its parent company, Sartorius AG.

Goldman Sachs analysts emphasize that Sartorius Stedim, having a higher quality business mix, lighter leverage, and stronger growth prospects, stands to benefit from the gradual recovery of the bioprocessing sector.

The bioprocessing industry has experienced significant volatility in recent years, largely due to destocking dynamics following COVID-19. Sartorius Stedim’s shares have particularly suffered, plummeting 65% from their peak in October 2021.

However, Goldman Sachs foresees potential for a rebound as the market stabilizes and enters a phase of more normalized growth patterns. The analysts stated, “From a high level, we appreciate the long-term dynamics in the bioprocessing market, and see Stedim positioned well to generate compounding returns as the single-use market returns to normalized growth.”

A key factor for the positive outlook is the reset of earnings expectations for Stedim following the pandemic-driven surge. The company benefited during the COVID-19 period due to its involvement in vaccine and therapeutic production. As these advantages faded, the destocking phenomenon across the industry became a headwind for revenue and profitability.

Yet, Goldman Sachs believes that earnings expectations have now adjusted to reflect a more sustainable growth trajectory, with 2025 projected to signify the start of a broader recovery.

In terms of valuation, Sartorius Stedim presents a compelling investment case relative to Sartorius AG. Despite both firms having comparable EV/EBITDA multiples for 2025 (approximately 23.6x for Stedim compared to 23.8x for Sartorius AG), Stedim displays a robust growth profile, higher margins, and reduced financial leverage.

This combination renders Stedim a more appealing investment for those looking to benefit from the anticipated recovery in the bioprocessing industry. The company’s leverage ratio is expected to decline from 2.9x net debt/EBITDA at the end of 2024 to 0.6x by 2028, enhancing its financial position further.

The long-term dynamics of the bioprocessing market are expected to remain robust, driven by structural growth factors such as the rising global demand for biologic drugs. Stedim, with its strong position in single-use bioreactors and other bioprocess initiatives, is anticipated to capture a significant share of this emerging market.

Analysts have observed that while Sartorius may still encounter some destocking, especially in the filtration business, they expect a recovery. The overall revenue growth outlook appears positive, with projections of a return to double-digit revenue expansion beyond 2025.

Furthermore, Goldman Sachs analysts note that while the book-to-bill ratio may remain below 1 until 2026, this does not necessarily indicate weak growth. Instead, it reflects the resolution of order backlogs accrued during the pandemic.

Goldman Sachs’ revenue and EBITDA estimates for 2026 and beyond slightly surpass current consensus, driven by expectations of enhanced market dynamics and operational improvements.