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ROVI: 3Q’19 RESULTS AND T.P. UPGRADE (ANÁLISIS BANCO SABADELL)

3Q'19 vs. 3Q'18 Results
Sales: € 94.1 M (+29.6% vs. +29.3% expected and +24.5% expected by the market consensus);
EBITDA: € 21.0 M (+66.7% vs. +35.0% expected and +17.5% expected by the market consensus);
EBIT: € 16.4 M (+70.8% vs. +32.5% expected and +10.4% expected by the market consensus);
Net Profit: € 14.5 M (+79.0% vs. +41.0% expected and +19.8% expected by the market consensus);
9M'19 vs. 9M'18 Results
Sales: € 271.6 M (+24.1% vs. +24.0% expected and +22.4% expected by the market consensus);
EBITDA: € 47.5 M (+83.4% vs. +68.0% expected and +59.5% expected by the market consensus);
EBIT: € 34.1 M (+99.4% vs. +77.9% expected and +65.5% expected by the market consensus);
Net Profit: € 30.7 M (+95.5% vs. +75.9% expected and +65.0% expected by the market consensus);

The 3Q’19 results were better on the operating level due to higher margins. EBITDA grew above expectations (+66.7% vs. +35.0% BS(e) and +17.5% consensus) thanks to higher EBITDA margins (22.6% vs. 16.5% consensus), explained by the significant containment in general expenses (-16% vs. 2Q’19) and R&D (due to the completion of Doria). Positive performance also in sales, which grew +29.6% on the quarter (vs. +29.3% BS(e) and +24.5% consensus) despite the slowdown of its enoxaparine biosimilar, leaving the company in a positive position to meet its 2019 growth guidance in the high teens (vs. +22% BS(e) and +16% consensus).
The net cash position fell to € 0 M (€ -19 M on the quarter), in line with expectations due to working capital expansion (higher stocks/heparines).
For the first time, the company has given growth guidance on operating revenues’20 in mid-single-digits (between 0% and 10%), which is in line with the consensus (+5%) and slightly below our estimates (+8%)..
In short, the 3Q’19 results beat expectations on the operating level, with a 2020 revenues guidance in line with the consensus, and thus we expect a positive reaction but limited following the solid recent performance (+9% over the past month; +5% vs. IBEX). With this in mind, we upgrade our 2020-21 estimates (+7% in sales and +11% in EBITDA), updating our valuation of the pipeline (Doria Phase III; 28% T.P. vs. 16% previously) and rolling the model over, which has a joint positive impact of € +6.00/sh. on our T.P. up to € 22.50/sh. (-3% potential). Despite the upgrade, current levels are already pricing in, in our view, the excellent business prospects and following the good recent performance (+34% en 2019 y +20% vs IBEX), our T.P. does not yield potential, and thus we maintain our SELL recommendation.