Systematix Maintains 'Hold' Rating On Poly Medicure Despite Italy-Based Citieffe Acquisition — Here's Why

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Systematix Report

Poly Medicure Ltd. has announced acquisition of the Citieffe Group (Euro 31 million, at 10 times Ebitda) which is an Italy based medical device manufacturer focused on the fast-growing trauma and extremities sub-segment in the orthopedics space. This is the second acquisition by Poly Medicure in recent past and in line with their strategy to build presence in high value categories in medical device space inorganically.

We understand the acquisition has been done with a long term view. It adds niche capabilities to Poly Medicure and helps them enter a space with meaningful entry barriers and with a large growth potential.

The contribution margin of acquired business is high (~90%) and as they scale up we will see operating leverage kicking in meaningfully. There is enough spare capacity for Citieffe to scale up meaningfully higher from current levels without any incremental meaningful investments. Foray into plates manufacturing (expected in the near term) will meaningfully expand the target addressable market for Citieffe.

There are global players already entrenched in the category and hence Poly Medicure will need to find ways to differentiate to accelerate growth for themselves.

We retain our Rating to Hold and Target Price to Rs 2,016 with a multiple of 45 times on FY27 EPS.

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