MedicaNatumin
MedicaNatumin - Solid operating leverage from Jabushe orders (ABG Sundal Collier)

2018-09-18 15:45
Share of own products increased
Export success in East Asia
On 2020e earnings, EV/S 1.65x

Wrinkle free H1
MedicaNatumin reported H1 sales of SEK 89.2m, which was 11.2% above our estimate and corresponds to 47.2% y-o-y growth. The top-line beat was, however, small when compared to the EBIT outcome, which well surpassed our estimate of SEK 5.9m. EBIT amounted to SEK 17.3m, with an EBIT margin of 19.4%. Moreover, the company has delivered SEK 25m of the Chinese Jabushe orders. These orders strengthened the gross margin, which for H1 was 65.6%. The CEO said there were higher production volumes of own brands for H1 2018 than for full-year 2017. The first half of 2018 clearly delivered on the expected synergies with the acquisition of Natumin Pharma.

There is export potential besides China
We have raised our margin assumption for 2018 as MedicaNatumin clearly has hit an inflection point. However, no Jabushe orders have been added to date, making us more careful about including further large Jabushe orders for 2019e and 2020e. The visibility of these exports is poor and we are uncertain about both the down- and upside relating to them. We currently expect SEK 25m in Jabushe China exports for 2019. Excluding Jabushe we expect growth rates of ~5%. Our estimates do not include any sold licenses, received royalties or acquisitions. Overall, we are very positive about the massive success of Jabushe in China, which we believe could pave the way for other products.

High gross margins (60%+) with EV/sales
MedicaNatumin is trading at EV/EBIT of 6.3x for 2018e, but at current numbers multiples are higher for both 2019e and 2020e. The main reason for this is negative sales growth due to current expectations of decreased exports of Jabushe. In 2020 earnings will not have the skewed product mix of 2018, and will therefore be a better proxy for peer comparisons than the current year, which was boosted by Jabushe.


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