Novonesis: Quarter Has In-Line Organic Sales Growth Delivery, Stellar Performance in Household Care

Wide-moat Novonesis reported first-quarter 2024 organic revenue growth of 4%, in line with company-compiled consensus. The composition of growth from a segment perspective was slightly different, however, with stronger-than-expected 15% like-for-like growth for the householdcare business area, offset by a weaker-than-expected 5% decline for the human health business area. The strong growth in household care sales was attributed to the increasing penetration of enzyme solutions in emerging markets and to innovation. The decline in human health sales was mainly attributed to demand weakness for dietary supplements and early-life nutrition solutions, similar to dynamics reported by wide-moat DSM-Firmenich. Still, management indicated that momentum is improving going into the second quarter and confirmed a full-year outlook for organic revenue growth between 5% and 7% and adjusted EBITDA margin of around 35%. We increased our fair value estimate by 4% to DKK 410 after rolling and updating our model with the recently released pro forma numbers. Our 2024 forecast calls for organic sales growth of 5.5% and an adjusted EBITDA margin of 35%. Our long-term forecast is broadly unchanged, assuming around 6% organic revenue growth on average for the next decade and a midcycle adjusted EBIT margin of 31%/adjusted EBITDA margin of 39%.