WOOD& Co:
"While Sopharma’s consolidated 3Q20 results came in a touch better than we expected on the operatingl ines, the trend of deteriorating profitability we have witnessed this year is continuing, especially with regards to finished product sales, which contracted by 16% yoy. With sales in the lower-margin drug wholesale, in contrast, growing by 15% yoy, it is inevitable that the group’s EBITDA margin is coming under pressure (just 6.0% this quarter vs. 9.9% in the base period). Also, both above and below the operating lines, we see smaller, but still material negative impacts from FX revaluation, for both working capital and FX loans.While we had expected wholesale revenues growth to outstrip own product sales this year – the demand for drugs in medicine cabinets having only been exacerbated by the pandemic – we underestimated the quantum of the effect, which only makes the year more challenging. So, while we remain comfortable with our overall FY20E revenues target (of which the company booked 74% in 9M20), we are concerned that Sopharma may miss our full-year EBITDA target of BGN 101.2m, having generated only 65% of this so far this year."
"While Sopharma’s consolidated 3Q20 results came in a touch better than we expected on the operatingl ines, the trend of deteriorating profitability we have witnessed this year is continuing, especially with regards to finished product sales, which contracted by 16% yoy. With sales in the lower-margin drug wholesale, in contrast, growing by 15% yoy, it is inevitable that the group’s EBITDA margin is coming under pressure (just 6.0% this quarter vs. 9.9% in the base period). Also, both above and below the operating lines, we see smaller, but still material negative impacts from FX revaluation, for both working capital and FX loans.While we had expected wholesale revenues growth to outstrip own product sales this year – the demand for drugs in medicine cabinets having only been exacerbated by the pandemic – we underestimated the quantum of the effect, which only makes the year more challenging. So, while we remain comfortable with our overall FY20E revenues target (of which the company booked 74% in 9M20), we are concerned that Sopharma may miss our full-year EBITDA target of BGN 101.2m, having generated only 65% of this so far this year."
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