Sopharma Group: Russia/Ukraine exposure offsets progress on working capital (stays SELL)

We maintain our SELL rating on Sopharma, with an updated price target (PT) of BGN 4.17/share. With Russia and Ukraine accounting for c.40% of total product sales, reportedly, we expect a visible hit on the 2022E earnings. Despite the continuing (albeit unquantifiable) uplift from the pharmacy chains acquired at end-2020, we expect the EBITDA to fall by c.8% yoy this year and the reported net profit by c.50%, before recovering in 2023E. More’s the pity, in our view, as the company is finally delivering on its promised restructuring, shedding the underperforming Briz business and improving its working capital management (most visible via deleveraging). This means that the valuations on EV/EBITDAs are no longer demanding; however, absent a correction commensurate to the business’ exposure to the Ukraine conflict, neither are they attractive enough to justify owning the exposure, in our view.