Citigroup cuts Polypeptide to 'sell' as operational issues still drag profits

PolyPeptide AG

12/09/2023 12:52

** Citigroup cuts Polypeptide  PPGN.S  to "sell" from
"neutral", saying operational issues at the Swiss company, which
makes peptides for pharma and biotech companies, remain a drag
on profitability
    ** Technical and process issues affecting production
efficiency, as well as staffing issues, unfavorable product mix,
higher input costs and wage inflation should last until the end
of 2024, the broker says
    ** It adds that the continued need for investment shows that
margins are likely to remain under pressure regardless of strong
revenue growth
    ** Citi sees lower profitability and interest cost on new
financing significantly affecting net profits for at least two
years
    ** The broker highlights its 2024-25 EBITDA estimates are
~10-20% below consensus, while it flags negative FCF for the
next 4-5 years on higher capex guidance, weak profitability and
working capital requirements
    ** It deems the valuation "demanding" due to limited clarity
on improving fundamentals
    ** Shares in Polypeptide fall about 4%
    ** Out of seven analysts that cover Polypeptide, one rates
the stock "buy,"​ three rate it "hold" and three "strong
sell"/"sell" - LSEG data

 (Reporting by Mateusz Dobrzyniewski)
 ((Mateusz.dobrzyniewski@thomsonreuters.com))