Synlab AG

Overview Key strengths Key risks Pan-European laboratory with leading positions in key European markets like Germany and France. Reduction of PCR testing and inflationary pressures will likely weigh on margins in the next 12 months. Geographically diversified revenue base (largest exposure about 20%) reducing reimbursement risk. The European market remains fragmented, limiting the company's scale in some markets. Strong generation of cash flows in the past two years, linked to the contribution of polymerase chain reaction (PCR) testing. Ongoing merge and acquisition (M&A) activity to supplement limited organic growth will likely delay leveraging reduction in our forecasts. The coronavirus incidence rate dropping during the end of 2022 and beginning of 2023 has translated into less PCR testing, which we believe

...In 2023, S&P Global Ratings expect that a more abrupt reduction in PCR testing will contribute to Synlab's EBITDA generation reverting to pre-pandemic levels, resulting in adjusted debt to EBITDA (leverage) of 4x-5x. The coronavirus incidence rate dropping during the end of 2022 and beginning of 2023 has translated into less PCR testing, which we believe will set the tone for volume evolution in 2023 and beyond for most laboratories globally. This, combined with our anticipation of further price caps on tests from...

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