Redeye updates its view on Genovis following the Q2 report and the announced divestment of its antibody business. As a consequence, we have revised our model to reflect lower sales projections and adjusted our fair value range accordingly. However, we believe the 21% decline on the report day was an overreaction and with the share trading in bear case territory R/R looks attractive.

Q2 2024: Softer than anticipated across the board

Egetis Therapeutics

Mendus

Medivir

Bioinvent International

Saniona

Karolinska Development

Nanologica

Genovis

* Indirect exposure, though limited by a diversified customer base, to regulatory risks stemming from customers' projects. Revenue may be impacted if these projects encounter development setbacks.
* Limited independence from key individuals, though improving as the company matures and develops more robust systems and processes.
* Potential ethical concerns due to association with animal testing in the pharmaceutical research sector.
* Up and coming company with a modest market share, competing against larger, well-established players like Thermo Fisher and Promega.

* Strong recurring revenue model with high customer retention due to product integration in workflows, providing predictable income streams.
* Significant reinvestment opportunities in enzyme development and adjacent markets, supported by strong cash flow and profitability.
* Benefiting from secular tailwinds in biologic drug development, with a stable market dominated by few players and high barriers to entry.
* Impressive pricing power and high gross margins (85-90%), indicating strong competitive advantages and value proposition to customers.
* Diversified revenue base across products, customers, and geography, minimizing dependency on single factors and enhancing operational stability.

* Milestones and licensing revenue complicates comparison between quarters, whereas overall consistency in growth and profitability is irregular.
* On a quarterly basis the balance sheet and KPIs disclosures could benefit from greater transparency.
* The company is yet to payout any dividends and thus lacks any dividend track record.

* Consistent history of sales growth and the business model sets the stage for continued >20% growth in the core business. Profitable since 2019 and the optionality relating to bioprocess and outlicensing opportunities provides potential for non-linear growth.
* Most key rations point in the right directions, gross margins are in the 80-90% range.
* The business model provides operating leverage and operational efficiency, EBIT margins likely to climb north of 30% once volume accumulates.
* Strong balance sheet with limited debt and a strong net cash position opening up for in-organic growth opportunities.

* Inconsistent delivery on promises: While growth has been achieved in some areas, the company has fallen short in others, particularly in the bioprocess segment.
* Limited management ownership: Management as a group holds less than 1% of the company's equity, on the contrary board ownership is satisfactory.
* The company's quarterly reports could be more detailed in terms of KPIs.

* Strong leadership: CEO has a clear long-term vision, deep industry knowledge, and a history of success and value creation in the company.
* The board complement management with seasoned directors and relevant expertise, the largest owner is also represented on the board.
* Commitment to innovation: Consistently launches new products, demonstrates strong deal-making capabilities.
* Transparent communication with management being candid about mistakes, provides timely business updates, and focuses on long-term value creation in their investor communications.

SEKm	2022	2023	2024e	2025e	2026e
Net Sales	102.4	158.2	131.1	166.9	221.4
Sales Growth	10.0%	54.6%	-17.1%	27.3%	32.7%
EBITDA	14.9	63.9	41.3	58.3	89.4
EBIT	8.2	54.2	30.1	42.7	68.7
EBIT Margin	8.1%	34.3%	22.9%	25.6%	31.0%
EV/Sales	28.7	20.7	11.6	9.3	6.7
EV/EBIT	356	60.5	50.7	36.3	21.7

Genovis: Deviation table
	Q2 2023	Q3 2023	Q4 2023	Q1 2024	Q2 2024a	Q2 2024e	dev. %	dev. abs

Net sales	29.5	30.2	27.3	40.1	29.5	36.7	-20%	-7.2
Sales growth y/y	40%	31%	6%	-44%	0%	25%
Sales growth q/q	-59%	2%	-10%	47%	-26%	-8%

Gross profit	28.1	27.2	26.0	38.0	25.7	32.1	-20%	-6.4

OPEX	-20.5	-19.7	-22.4	-19.4	-20.5	-20.4	0%	-0.1
Other external expenses	-7.2	-7.2	-7.8	-7.3	-7.7	-7.7
Personnel costs	-13.0	-11.1	-11.7	-11.7	-11.6	-11.6
Other operating expenses	-0.3	-1.4	-2.9	-0.4	-1.2	-1.1

EBITDA	7.7	7.6	3.6	18.6	5.3	11.8	-55%	-6.5
EBITDA margin	26%	25%	13%	46%	18%	32%

EBIT	6.0	4.5	0.4	15.8	2.5	9.8	-74%	-7.3
EBIT margin	20%	15%	1%	40%	9%	27%

Source: Redeye research (estimates), Genovis (historical data)

Q2 2024: Softer than anticipated across the board

Divestment of the antibody business

Estimate revisions and valuation

Q2 2024: Softer than anticipated across the board