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ALMIRALL: 3Q'19 RESULTS AND CHANGE OF T.P. AND RECOMMENDATION TO BUY (ANÁLISIS BANCO SABADELL)

3Q'19 vs. 3Q'18 Results
Sales: € 207.4 M (+19.2% vs. +17.8% BS(e) and +18.9% consensus);
EBITDA: € 70.3 M (+59.8% vs. +39.8% BS(e) and +54.5% consensus);
EBIT: € 38.0 M (+74.3% vs. +30.7% BS(e) and +70.2% consensus);
Net Profit: € 35.4 M (-14.1% vs. -48.9% BS(e) and -32.8% consensus);
9M'19 vs. 9m'18 Results
Sales: € 637.7 M (+17.8% vs. +17.3% BS(e) and +17.7% consensus);
EBITDA: € 236.5 M (+58.2% vs. +52.3% BS(e) and +56.7% consensus);
EBIT: € 139.0 M (+59.2% vs. +48.3% BS(e) and +58.2% consensus);
Net Profit: € 97.3 M (+4.4% vs. -11.0% BS(e) and -3.9% consensus);

The 3Q’19 results beat expectations on the operating level and in Net Profit. EBITDA grew above our expectations although in line with the consensus (+49.8% vs. +39.8% BS(e) and +54.5% consensus) thanks to sales (+19.2% vs. +17.8% BS(e) and +18.98% consensus) and, especially, to higher EBITDA margins (33.9% vs. 31% BS(e) and 32.9% consensus). Net Profit came in far above all estimates (-14.1% vs. -48.9% BS(e) and -32.8% consensus) due to an unexpected positive impact on financials (€~8 M on the quarter due mainly to fluctuations of the exchange rate). Adjusted for this effect, Net Profit would have been in line with the consensus estimate (-33% vs. 3Q’19) and above our estimates (-49%).
NFD increased by +2.5% (in line with expectations) to € 470 M due to the US$ 50 M payment this quarter for exercising the call option on Lebrikizumab). Thus, debt decreased to €~1.6x NFD/EBITDA excl. pension plans (vs. 1.7x NFD/EBITDA in 2Q’19). Separately, ALM maintained its 2019 guidance of sales growing by low double-digit rates (vs. our estimate of +14.3% BS(e) and +13.5% consensus) and EBITDA of between € 300 M and € 310 M (vs. our new estimate of € 308 M BS(e) and € 306 M consensus).
After this set of results, we roll over our model, raise our estimates for 2020-2021 (+3% in sales and +10% in EBITDA) and upgrade our recommendation to BUY. We set a valuation range of between € 19/sh. and € 21/sh. (+15.4% upside at the midpoint of the range), based on the positive growth profile of the company’s dermatology portfolio (with several products in a ramp-up phase: Seysara, Skilarence and Ilumetri) and the contribution to the T.P. (adjusted for probability of success) from the main products in its pipeline: Lebrikizumab and KX2-391 (both in phase III, for the treatment of atopic dermatitis and actinic keratosis.