UBS on Tuesday upgraded Tecan Group AG from neutral to buy and increased its 12-month price target to CHF208 from CHF162, pointing to anticipated margin recovery as the principal rationale for the rating change. The bank said it sees upside in profitability that it believes the market has not fully incorporated into Tecan's current valuation.
Tecan's shares ended trading at CHF161.80 on June 30, and the company carried a market capitalisation of 2.07 billion Swiss francs at that close.
In its research note, UBS said top-line performance for the Swiss laboratory instrument maker has "bottomed out on gradually improving market dynamics gaining momentum over time." The analysts cited their proprietary capital expenditure tracker and industry-specific indicators, including working hours of production employees in the medical equipment and supplies sector, as supporting evidence for that view.
UBS projected organic sales growth of roughly 5% in fiscal 2026, 6% in fiscal 2027 and 7% in fiscal 2028. On that basis, the broker modelled group revenues increasing from CHF884 million in FY26 to CHF1.01 billion in FY28.
The bank also lifted its EBITDA margin assumptions for the group to 15.9% in FY26, 17.6% in FY27 and 19.6% in FY28, with margins continuing to improve toward 20.3% by FY30 according to UBS's forecasts.
UBS said it is explicitly discounting cost savings of approximately CHF29 million to CHF30 million in FY28 and FY29 tied to a previously announced efficiency improvement and cost reduction programme at Tecan. That programme, disclosed at the company’s FY25 results after a reshuffle of senior management, is targeted to provide between CHF25 million and CHF35 million of incremental EBITDA support by 2028 through measures such as streamlining operations, optimising supply chains and R&D productivity, and greater utilisation of production capacity in lower-cost countries.
On valuation, UBS described the stock as undemanding. Using its estimates, the bank calculated an enterprise value to EBIT multiple of 16.3 times on an FY27 basis, which it said is about 24% below Tecan's average multiple over the past fifteen years.
Applying the UBS HOLT framework, the analysts said the market currently appears to discount sales growth of roughly 4% on average and an FY30E EBITDA margin of about 18% - levels the broker views as below its revised projections of approximately 6% average sales growth and a near-20% EBITDA margin by FY30.
UBS sketched an upside scenario with a CHF262 share price that assumes a rapid return to historically high sales growth and stronger demand for automation equipment within research and diagnostic laboratories. The bank also outlined a downside scenario of CHF124, which assumes ongoing constraints on customer investment budgets and continued softness in diagnostic lab activity.
The note highlighted that headwinds persist in certain end markets for Tecan, including demand related to U.S. government and academic spending. UBS said it also takes a cautious view of activity from Chinese customers, which it estimated represent a mid-single-digit share of group revenues from direct sales.
Tecan is due to report its first-half 2026 results on August 11. UBS forecast first-half organic sales growth of 3.4% and first-half margins of 13.6%, versus the company's full-year guidance of low-single-digit local currency sales growth and full-year margins of 15.5% to 16.5%. UBS said it did not expect the upcoming results to act as a major catalyst for the stock.
How UBS's view maps to investor considerations
- UBS's upgrade rests on a combination of an expected recovery in revenue trends and an expansion in EBITDA margins that together underpin the higher price target.
- The bank's model incorporates specific cost savings from Tecan's efficiency programme and assumes continued productivity gains from operational changes announced at FY25 results.
- Despite the upgrade, UBS flagged remaining demand risks in defined customer segments and noted that the next set of quarterly results are not likely to be transformative.