ADMA Biologics Inc.

ADMA Details

Decent Rise in Q1FY21 Revenue: ADMA Biologics Inc. (NASDAQ: ADMA) is an end-to-end commercial biopharmaceutical company focused on manufacturing, marketing, and developing specialty plasma-derived biologics. For Q1FY21, the company reported record quarterly revenues of $16.0 million, up 57% on the previous corresponding period (pcp). Over the quarter, the company strengthened its supply chain and made significant progress towards its objective to establish end-to-end control of its production operations. Net loss for Q1FY21 stood at $18.4 million. As at 31 March 2021, the company had total assets of $235.7 million, up 13% compared to the year-end 2020.

Q1FY21 Results (Source: Company Reports)

Received Approval From FDA: In April 2021, ADMA received approval from U.S. Food and Drug Administration (FDA) for the company’s expanded manufacturing process, enabling fractionation and purification of a 4,400-liter plasma pool for the manufacture of Intravenous Immune Globulin (“IVIG”).

Key Risks: The company is exposed to the risks related to the delay or non-receival of necessary approvals from regulatory authorities. The COVID-19 pandemic has the potential to impact the company’s business, liquidity, financial condition, and results of operations, as well as its overall market size and potential for its products.

Outlook: Following the FDA approval for the company’s Intravenous Immune Globulin (“IVIG”) production scale expansion, it is expected that the total manufacturing production capacity of the company will increase by up to 50% compared to the Company’s prior expectations. Further, the company expects that its multi-year remediation and production enhancement objectives will allow it to yield significant returns in the way of margin improvements.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock has corrected by 14.7%. It is currently inclined towards its 52-weeks’ low price of $1.45, offering a decent opportunity for accumulation. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We believe that the company can trade at a slight premium to its peer mean EV/Sales (NTM trading multiple), considering the decent revenue growth in Q1FY21, rising cash balance, and recently received FDA approval for the company’s Intravenous Immune Globulin (“IVIG”) production scale expansion. We have taken peers like Biocept Inc (NASDAQ: BIOC), Fortress Biotech Inc (NASDAQ: FBIO), Minerva Neurosciences Inc (NASDAQ: NERV), etc. Considering the company’s decent performance in Q1FY21, expected growth in total manufacturing production capacity, decent long-term outlook, current trading level, valuation and associated key risks, we give a “Speculative Buy” rating on the stock at the closing price of $1.74, up by ~0.58% as on 4 June 2021.

ADMA Daily Technical Chart, Data Source: REFINITIV

Vista Outdoor Inc. 

VSTO Details

Expanding Market Share via Acquisitions: Vista Outdoor Inc. (NYSE: VSTO) is involved in the designing and manufacturing of consumer products in the outdoor sports and recreation markets. The company has recently announced the acquisition of e-Bike brand QuietKat and Hunt-inspired female apparel brand Venor. It is expected that this acquisition will expand the company’s market share.

Q4FY21 and FY21 Result Highlights: For Q4FY21, the company reported sales of $597 million, up 40% on pcp, driven by decent demand across both Outdoor Products and Shooting Sports segments.  This took the total FY21 sales to $2.23 billion, up 27% on the previous year. Gross profit for Q4FY21 stood at $182 million, up from $85 million in pcp. EBIT for Q4FY21 increased to $25 million, compared with $4 million in the prior year quarter. Gross profit in FY21 increased by 76% to $633 million from the prior fiscal year.

Q4FY21 and FY21 Results Highlighting (Source: Company Reports)

Outlook: For FY22, the company expects its total sales to be in the range of $600 million to $620 million. EPS for FY22 is expected to be in the range of $0.80 to $0.90. The company expects its FY22 capital expenditures to be approximately 15% higher than FY21. Further, R&D expenses are also expected to be approximately 25% higher than FY21.

Key Risks: The company is exposed to the risks and uncertainties caused by the COVID-19 pandemic, which could impact the day to day operations and disrupt the supply chain. Further, the company is exposed to the risks related to the changes in the conditions affecting employment levels, consumer confidence and spending, conditions in the retail environment, and other economic conditions affecting demand for the company’s products and the financial health of its customers.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the company’s stock has provided a return of 111.98%. The stock is currently inclined towards its 52-weeks’ high price of $45.00. On the technical analysis front, the stock has a support level of ~$35.42 and resistance of ~$44.725. We have valued the stock using a P/E multiple based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms). We believe that the company can trade at a slight discount to its peer mean P/E (NTM trading multiple), considering its high cash cycle, and uptick in debt to equity multiple and associated key risks. We have taken peers like Brunswick Corp (NYSE: BC), Johnson Outdoors Inc (NASDAQ: JOUT), Sturm Ruger & Company Inc (NYSE: RGR), etc. Considering the company’s decent stock performance in the last six months, its current trading level, uncertainty surrounding COVID-19 pandemic, and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $42.44, down by ~1.39% as on 4 June 2021.

VSTO Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined:

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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