Overview
Vectura Group Plc (VEC) is a research and development company related to the inhaled formulation, development capabilities and devices. The company is a leading inhaled disease-focused company with an employee base of 450 people and 9 million patients utilising the company’s products. The company employed 200 experienced scientists to lead clinical, formulation, device and regulatory teams.

Recent News
On 22nd April 2019, the Vectura Group Plc announced for issuance of a new European patent to use particles in medicine composition. The patent was approved by the European Patent Office with patent number ES2708961 (T3).

Financial Highlights- FY2018 (£, million)

(Source: Annual Report, Company Website)
 
In the financial year ending December 2018, the company’s reported revenue was £160.5 millionas compared to £148 million in the same period of last year. There was an increase of 8.4 per cent due to a strong supply-demand for flutiform product and a new deal with Hikma which resulted in addition to business development revenue of £6.6 million. The gross profit for FY2018 stood at £98.9 million as compared to £90.8 million in FY2017. The company’s reported adjusted EBITDA stood at £39 million in FY2018 against £25.8 million for FY2017. The operating loss for FY2018 stood at negative £105.4 million against negative £96.2 million in FY2017. There had been a surge in the Amortisation and impairment expenses by £17.3 million in FY2018. The reported loss before taxation was negative £104.8 million in FY2018 against negative £102.2 million in FY2017. The loss after taxation for FY2018 stood at negative £88.2 million against negative £85.7 million in FY2017.The loss per share (basic and diluted) stood at negative 13.2 pence in FY2018 as compared to negative 12.6 pence in FY2017.

Share Price Performance

Daily Chart as at April-24-19, before the market close(Source: Thomson Reuters)
 
On 24th April 2019, at the time of writing (before the market close, GMT 9:35 AM), Vectura Group Plc shares were trading at GBX 72.95, up by 0.62 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 90.15/GBX 65.85. The outstanding market capitalisation was around £484.08 million.
 
Valuation Methodology


Conclusion
The company had shown good top line performance for the current financial year. There had an increase in the sales of the company’s flutiform product by 17.7 per cent in the current financial year. The recent deal with Hikma had increased the company’s development revenue. Due to high barriers in entry and exit, the company faces less competition and is able to capture large market portion. The company remained a cash generative with a balance of £108.2 million in the current financial year due to focused investment prioritisation and tight financial management approach opted by the company. The company’s adjusted EBITDA improved by over 50 per cent, mainly driven by increased revenue, high supply margin and low expenditure on R&D. Based on strong growth prospects and supported by the valuation done using the above method, we have given a Speculative BUY recommendation at the closing price of GBX 72.50 (as on 23rd April 2019) with single-digit upside potential based on 2.40x NTM EV/sales (approx.) on FY19E sales.
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.
*The speculative buy recommendation is valid for the current price as covered in the report (as on April-24-19).

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