BioMaxima - 4Q22 financial results preview

Sector: Health Care & biotechnology

Market Cap: US$ 24.1 m

Bloomberg: BMX PW

Av. daily turnover: US$ 0.03 m

Price: PLN 24.25

12M range: PLN 18.14-31.05

12M EFV: PLN 36.40 (→)

Free float: 73%

Recent events

1. 3Q22 financial results: November 2022
2. Funding for a production line: January 2023
3. Dividend proposal (DPS at PLN 0.50): April 2023

Upcoming events

1. Release of FY22 consolidated financial results: April 28
2. Release of 1Q22 consolidated financial results: 3Q23 financial results: May 30
3. Dividend payment: June

Guide to adjusted profits

No factors necessitating adjustments.

Key data

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Stock performance

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4Q22 financial results preview

We expect 4Q22 revenues to be lower yoy due to the high base effect (in 4Q21 the Company’s results were supported by the agreement for a huge SARS-CoV-2 tests delivery). Currently, testing for SARS-CoV-2 contributes marginally to the Company’s revenues (less than 3% in 3Q22). Similarly to the previous quarter, 4Q22 profitability should be affected by high inflation. At the moment BioMaxima is presumably making adjustments in the price lists to account for higher costs, which, in the management’s opinion, may take one or two quarters. All in all, we forecast 4Q22 and FY22 revenues/ EBITDA/ EBIT/ NI to reach PLN 13.1/ 1.0/ 0.5/ 0.5 million and PLN 143.6/ 37.2/ 35.2/ 29.0 million, respectively.

Financial forecasts for 2023 and onwards

Sales. After the exceptional 2022 we do not expect subsequent big contracts for a SARS-CoV-2 tests delivery to follow and forecast the Company’s recurring revenues at PLN 50-60 million annually (before launching a new production facility). Given some delay in the launch of new production capacities we assume that their contribution to revenues will be visible no sooner than from 4Q23. In result, we lower our FY23 sales forecast to PLN 56 million and assume that new production capacities will help increase the Company’s sales to c. PLN 100 million in FY26.

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Profitability. We believe FY23 margins will be under pressure from (i) higher costs (the price list adjustment corresponding to a costs increase may take one or two quarters) and (ii) possible one-off costs related to the launch of new production lines. We expect the EBIT margin to hit c. 11% this year while in the following years an increase in the share of own products in the sales mix with a growing scale of operations should support the Company’s profitability and generally we assume slightly higher margins in the upcoming years vs our previous forecasts.

CAPEX. On the back of a purchase of a new production line announced in January (BioMaxima was granted a funding for 60% of the investment value) we raise FY23 capex forecast from PLN 10.4 million to PLN 12.5 million and the high inflation environment makes us slightly upgrade capex forecasts for the following years which results in the D&A forecast increase.

Net cash. In spite of high investments carried out this year we expect the Company’s net cash to reach PLN 6.9 million eop considering the impact of a dividend proposal at PLN 0.50 per share which turned out lower than we expected (PLN 1.00 per share) and partial working capital release due to a lower sales forecast.

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Valuation

The changes in our financial forecasts do not have any material impact on estimations of the Company’s FCF in the definite forecast period which coupled with the lower RFR increases our DCF valuation of BioMaxima’s equities. Due to lowering of 2023- 25 forecasts the peer relative comparison is lower. The above mentioned factors offset each other and ultimately our 12M EFV for Biomaxima at PLN 36.40 stays intact.

Catalysts

1. Increase in demand for the Group’s products unrelated to the pandemic
2. Increasing patients awareness
3. Production capacity expansion
4. Successful launch of new products
5. Exports development
6. Sale of drug tests related to new regulations
7. Need for diagnostics of unvaccinated Ukrainian migrants (SARS-CoV-2, measles, tuberculosis, poliomyelitis)
8. Acquisitions of companies compatible with the Company’s operations
9. A potential takeover target
10. Successful restructuring of the Romanian subsidiary
11. Moderate efficacy of vaccines and drugs for Covid-19
12. Presence in all the fast growing IVD segments
13. Increasing recognition of the Company in Poland and abroad
14. High efficacy of the Company’s tests in detection of Omicron
15. Spreading over time the changes in law (IVDR)

Risk factors

1. Dwindling demand related to the economic deterioration
2. Continuous inflationary pressure on margins
3. The SARS-CoV-2 pandemic development
4. Change in the health care systems priorities
5. Change in reimbursement policies and IVD funding
6. Change in cooperation terms with public bodies
7. Change in law (IVDR) (postponed for 3 years)
8. Entry of new solutions to the market
9. Growing competition
10. Intellectual property breach
11. Deterioration of products quality
12. Loss of key employees
13. Lack of qualified staff
14. Changes in the shareholding structure
15. FX rates

Competitive advantages

1. European brand (vital for exports)
2. Attractive products prices as compared to global players
3. Well established market position in Poland
4. Important sales relationships outside Poland
5. Broad product offer (over 3,000 indexes)
6. Own production technologies
7. Focus on globally known and implemented technologies

Analysts: Sylwia Jaśkiewicz, CFA Mikołaj Stępień

GPW’s Analytical Coverage Support Programme 3.0