Novacyt SA

Novacyt SA (LON: NCYT) is a France-based Clinical Diagnostics Company. The Company deals in diversified diagnostic products used in oncology, haematology, microbiology, LBC, and serology testing.

The Company will release full-year 2020 results in April 2021.

Investment Highlights - Novacyt SA – Speculative Buy at GBX 681.00

• The Company has delivered a strong financial performance in FY2020, driven by strong demand for covid-19 products. The Company expects strong performance to continue in FY2021.
• In the last one year, the Company delivered a significant return of ~415.89% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, the EV/Sales multiple of Novacyt SA is currently lower as compared to the corresponding multiple of the Biotechnology & Medical Research industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is currently supporting an upside move (around 33 level), which means the stock price could increase in the short term.

Key Risks

• The pace of development in the healthcare industry and competitive pressure may impact business operations.
• Brexit, customer credit risk and foreign exchange fluctuations can also hamper the business.

Trading Update for FY2020 (31 December 2020) (released on 29 January 2021)

• For the full year of 2020, the revenue surged by more than 20x to €311.6 million as compared with the previous year, with a gross margin of above 80%.
• The Company delivered a strong performance in the second half of the financial year 2020, with revenue of €239.2 million (H1 FY2020: €72.4 million), and EBITDA of above €161 million (H1 FY2020: €49.4 million).
• The Company has a strong cash position with €101 million as on 31 December 2020 (30 June 2020: €19.7 million and 31 December 2019: €1.8 million).
• The Company continue to make an investment in the pipeline of new covid-19 tests to meet evolving clinical needs.
• The Company acquired a diagnostic instrument development and manufacturing company, IT-IS International, in accordance with the strategy.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has delivered a significant performance in the second half of the financial year 2020 and expects strong momentum in the financial year 2021, with robust demand for the COVID-19 product portfolio. The Company has signed significant contracts with national governments in 2020 and will launch several products in 2021 and expand the Company's VersaLab™ service. Recently, the Company launched PCR (polymerase chain reaction) genotyping assay portfolio to detect Covid-19 variants. NCYT has further strengthened its cash position and will continue to make an investment in organic expansion, external business development and innovation. Overall, it seems to be well-positioned to deliver on the vision of becoming a market leader in respiratory and transplant clinical diagnostics. The stock made a 52-week low and high of GBX 80.10 and GBX 1,276.00, respectively.

Based on the above rationale, we have given a “Speculative Buy” recommendation on Novacyt SA at the current price of GBX 681.00 (as on 24 February 2021, before the market close at 8:00 AM GMT).

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