Vesuvius Group PLC

Vesuvius PLC (LON: VSVS) provides molten metal flow engineering and technology services. It serves the steel and foundry industries.

Rationale for Valuation – HOLD at GBX 564.00

• VSVS continued robust working capital performance and improved Net Debt/EBITDA to 1.1x at the end of H1 FY21 from 1.2x at FY20 end.
• There was a 100% improvement in interim dividend, reflecting confidence in the optimised manufacturing footprint, new product pipeline, and ongoing R&D investment to generate substantial value for its shareholders.
• The incremental selling price shown structural growth in its end markets of steel and foundry.
• On a forward 12-month basis – EV/EBITDA, Price/Earnings, and Price/Cash Flow valuation multiples are undervalued against the median of the Industrials sector.
• From a technical standpoint, VSVS’s stock price is trading above the 20-day EMA (GBX 556.40), reflecting a bullish price momentum.

Key Risks

• The increase in selling prices offset the raw-material costs; however, it didn’t fully mitigate the freight costs in H1 FY21. The resurgence in delta coronavirus variant can exacerbate the supply chain disruption and impact profitability margins.
• There is a likelihood of revenue reduction from reduced end-market access amid complex and changing regulatory environment.

Interim Results (for the half year ended 30 June 2021, as on 29 July 2021)

 (Source: Company Website)

• During H1 FY21, revenue jumped 18% year-on-year on an underlying basis, reflected recovery in Steel and Foundry Divisions.
• Similarly, trading profit soared 54% year-on-year in H1 FY21 to £73.3 million.
• The Group recommended a 100% increase in interim dividend from 3.1 pence in H1 FY20 to 6.2 pence in H1 FY21.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative) 

Conclusion 

Vesuvius demonstrated a solid commercial performance in H1 FY21 on the back of market share gains and continued improvement in end markets. However, it also continued to experience the inflationary pressure pertaining to raw-materials and freight. With incremental selling price, the trading profit in H2 FY21 is expected to be similar to H1 FY21. Beyond FY21, continuing structural growth in end markets shall present attractive organic growth opportunities. The stock made a 52-week High and Low of GBX 595.00 and GBX 380.20, respectively.

Based on the strong commercial performance, end markets recovery, incremental selling prices, market share gains, upcoming growth opportunities, and favourable valuation conducted above, we have given a “HOLD” stance on Vesuvius Group PLC at the current price of GBX 564.00 (as on 31 August 2021, 7:04 AM GMT), while we look forward to taking fresh position once short-term uncertainties pertinent to freight and raw-material inflation fades away.

Bioventix PLC

Bioventix PLC (LON: BVXP) develops and commercialize high-affinity monoclonal antibodies for its application in clinical diagnostics.

On 18 October 2021, BVXP will release its FY21 results for the full year from 1 July 2020 to 30 June 2021.

Rationale for Valuation – HOLD at GBX 4,150.00

• BVXP has a resilient business model, and thus, it continued to follow its established dividend policy.
• The continued success of the core antibody business and vitamin D antibody shall bring further progress in FY21. Adjacently, the Company is optimistic about the troponin revenues.
• Since FY16, BVXP has maintained excellent profitability margins as gross margin, operating margin and the net margin remained above 91%, 75%, and 63%, respectively. All the margins are significantly higher than the industry median.
• From a technical standpoint, BVXP’s stock price is trading above the 20-day EMA (GBX 4,054.00), reflecting a bullish price momentum.

Key Risks

• The diagnostic pathways in hospitals and clinics have been impacted with the Covid-19 pandemic. Therefore, the Company witnessed a significantly lower volumes in pandemic affected areas.
• The unfavorable exchange rates impacted the profitability in H1 FY21, and it can impact even FY21 results.

Recent News

Appointment of CFO: On 1 July 2021, BVXP appointed Bruce Hiscock to the Board as Chief Financial Officer with immediate effect.

Interim Results (for the six months ended 31 December 2020, as on 29 March 2021)

 (Source: Company Website)

• During H1 FY21 vs H1 FY20, revenue surged 1.3% to £5.2 million. However, profit before tax declined 9% to £3.7 million.
• The Group ended H1 FY21 with closing cash balance of £5.8 million.
• The interim dividend jumped 20% to 43 pence per share (H1 FY20: 36 pence). On 8 April 2021, shared were marked as ex-dividend.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Conclusion 

During H1 FY21, BVXP reported a modest rise in revenue and cash balance despite the challenging operating environment. The Group also maintained a lucrative dividend policy, which reflects the management’s confidence in the business outlook. The lockdown easing shall support the revival of vitamin D antibody sales. The sales related to troponin antibodies grew significantly in H1 FY21 and shall continue the momentum. The stock made a 52-week High and Low of GBX 4,549.24 and GBX 3,800.00, respectively.

Based on the resilient financial performance, robust profitability margins, dividend increase, we have given a “HOLD” stance on Bioventix PLC at the current price of GBX 4,150.00 (as on 31 August 2021, 7:05 AM GMT), while we look forward to taking fresh position when short-term uncertainty fades away.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*The reference data in this report has been partly sourced from REFINITIV.

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