Genovis reported both sales and profitability above our estimates, delivering solid performance despite end-market uncertainty. Sales grew by 9%, and the EBIT margin reached 67%, or 27% when adjusted for antibody-related sales and the divestment. The outlook seem to be improving on the demand side of things, and with SEK156m in cash on the balance sheet, the company stands well-positioned to capitalize on future inorganic growth opportunities.

As of Q4, following Genovis' divestment of the antibody business the company is now a pure enzyme play, which have a few impliactions. Historically, Genovis' enzyme business have portrayed a higher growth and profitability than the antibody business, which should support for a continued margin expansion in the coming years. In the report, Genovis also mentions ongoing sales preparation activities for Sequrna's platform for RNAase inhibitors, which the company anticipates will support expansion into new application areas, adding another potential growth angle, albeit being unlikely to have any material impact in the coming quarters.

Alongside model fine-tuning, we have modestly raised our Q4 sales and EBIT estimates, now assuming 34% y/y growth in Q4. As a result, these adjustments slightly increase our base case to SEK53 (previously SEK52). Despite the share trading up 27% following the report and a positive trajectory yesterday, the share continues to trade slightly above our bear case. Continued growth, both organic and inorganic, a potential new partner for Xork, and advances in the bioprocess field remain essential drivers for a valuation upgrade. Following these adjustments to our valuation model, we slight valuation upgrade.