Monash IVF Group Ltd (ASX: MVF) shares have been among the most controversial ASX-listed companies this year.
Monash IVF operates 13 clinics and is Australia's second-largest IVF provider.
Its share price hit a 52-week low of $0.54 in June, following two controversial incidents that caused investors to hit the sell button.
Earlier in the year, Monash IVF disclosed that a Brisbane patient was mistakenly implanted with another patient's embryo. This sent the share price 36% lower that day.
Then in June, the company revealed a second mistake. Specifically, contrary to their treatment plan, a patient's own embryo had been transferred back to them (instead of their partner's). This causes Monash IVF shares to fall 25% that day.
The revelation of two mistakes just a few months apart did not go down well with shareholders. It rocked shareholder confidence and weighed on sentiment.
However, following the second incident, Macquarie Group Ltd (ASX: MQG) maintained that shares were oversold and that the company was worth more than double its 52-week low.
Since then, Monash IVF shares have partially rebounded. While still down 36% for the year to date, they are up 46% from their 52-week low.
Image source: Getty Images
Has Macquarie's view changed?
Investors may be wondering whether its too late to buy the stock.
Yesterday, Macquarie released a new research note, largely affirming its view on Monash IVF shares.
The broker has maintained an outperform rating.
Its price target is also unchanged at $1.30.
Given that Monash IVF shares closed at $0.80 yesterday, this suggests 70% upside from here over the next 12 months, including capital growth and dividends.
Monash IVF currently offers an attractive dividend yield of 6.38%.
Affirming this recommendation and addressing past controversies, the broker said:
Despite incidents, we believe the share price has overreacted and valuation is attractive at current levels. We continue to see medium-longer term tailwinds for the IVF industry, with MVF well placed to capitalise on genetic testing growth.
According to Macquarie, total Medicare IVF cycles declined 7.8% in June (days adjusted), or 3.1% on an absolute basis. Fresh cycles declined 11.2% and frozen declined 3% compared to the prior corresponding period.
However, Macquarie believes the industry is poised for growth over the medium-long term
Grand View Research expects the Australian in vitro fertilisation market to grow at a CAGR of 7% from 2024 to 2030. Frozen Nondonor is expected to be the fastest-growing procedure type.
Genetic testing was added to the Medical Benefits Schedule (MBS) in November 2023. According to Macquarie, around 191,000 tests have been performed to date. Monash IVF expects a portion to be converted to IVF cycles.
Macquarie does not currently include any upside from genetic testing in its valuation. However, should carrier screening boost IVF cycles in the future, this could result in a higher valuation for the company above Macquarie's current target price of $1.30.
Foolish Takeaway
Monash IVF shares have had a controversial start to the year. However, Macquarie recently maintained that they are materially undervalued. Those looking for value in the current market should set their calendar to 22 August, when Monash IVF is due to report its FY25 results.
