Getinge: New Operational and Regulatory Stumbles Lead to Fair Value Drop to SEK 221 From SEK 260

Getinge’s recent litany of regulatory, quality, and supply chain troubles across multiple products provides us with a flashback to 2013-2015 when similar issues culminated in a consent decree by the U.S. Food and Drug Administration. We've lowered our fair value estimate to SEK 221 per share, down from SEK 260, as we don’t anticipate Getinge can fully resolve these issues until later in 2024. Moreover, considering the firm’s spotty record on execution, we wouldn’t be surprised to see another warning crop up between now and 2024. Considering Getinge’s performance over the last decade, we cast a skeptical eye on this firm’s ability to transform itself into an operator where hiccups are the exception rather than the rule. Despite the new missteps, we’re holding steady on Getinge’s narrow economic moat, which stems from its sterilization business and other equipment with high switching costs that haven’t changed in our view. Nonetheless, we’re eyeing the rest of Getinge carefully, and if the other businesses move into value-destruction mode, we would entertain a downgrade to Getinge’s moat.