Emergent BioSolutions, Inc.

EBS Details

Emergent BioSolutions, Inc. (NYSE: EBS) is a global life sciences company that develops a portfolio of novel products and solutions that address the accidental, deliberate and naturally occurring public health threats (PHTs) to civilian and military populations. The company has introduced ten innovative products across its three main business divisions namely, Vaccination. Medicines and Medical devices. It also operates one service business unit: contract development and manufacturing organization (CDMO), which is engaged in drug manufacturing for pharmaceutical and biotechnology industries and the United States Government (USG) and non-Governmental organizations. As of October 18, 2021, the company's market capitalization stood at USD 2.71 billion. 

Latest News:

• Updates on Chikungunya Vaccine: The company has started phase 3 study of the single-dose chikungunya vaccine for examining the safety and immunogenicity of the vaccine candidate. EBS is highly optimistic for addressing solution to this virulent disease.

Q2FY21 Results:

• Double-Digit Growth in Topline: EBS reported a YOY growth of 25.15% in its total revenues to USD 740.5 million in H1FY21 (ended June 30, 2021) compared to USD 587 million in H1FY20, attributable to expansion in sales of NARCAN Nasal Spray and CDMO services.
• Surge in CDMO Services: The CDMO segment, which accounted for 50.60% of the total revenue in H1FY21, reported a YoY growth of 299% to USD 374.7 million in H1FY21 from USD 94 million in H1FY20.
• Decline in Net Income: The company has reported a slight decline in H1FY21 net income to USD 74.3 million from USD 80.0 million reported in H1FY20.
• Cash and Debt Position: As of June 30, 2021, the company had cash and cash equivalents of USD 447.5 million and total debt of USD 854.0 million.

Key Risks:

• Customer Concentration Risk: Sales of Anthrax vaccine (AV 7909) and Smallpox vaccine (ACAM2000 to USG accounted for ~64% of the EBS’ total FY20 revenue. Therefore, any downturn in demand from USG or material alteration of agreement with USG could harm the company’s financials.
• Regulatory Risk: EBS operates in the highly regulated biotechnology industry and is subject to strict regulatory norms, both within and outside the U.S., non-observance of which could delay, recall, or even suspension of prior approvals.

Outlook:

FY21 and Q3FY21 Guidance (Source: Investor Update, July 29, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation   

     (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.

EBS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

EBS' share price has decreased 52.57% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 49.35 to USD 127.20. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 34.40. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 61.35.

Considering the correction in the stock price in the past nine months, encouraging outlook, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 50.41, down 0.55% as of October 18, 2021.

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

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

Lakeland Industries, Inc.

LAKE Details

Lakeland Industries, Inc. (NASDAQ: LAKE) manufactures and sells industrial protective gear and accessories to over 1,600 global safety and industrial supply wholesalers, as well as federal, state, and municipal governments and departments. LAKE goods are sold in over 50 countries worldwide, including China, the European Economic Community (EEC), Canada, Chile, Argentina, Russia, Kazakhstan, Colombia, Mexico, and Southeast Asia. Manufacturing facilities for the firm are situated in China, Mexico, Vietnam, Argentina, and India.

Latest News:

• Share Repurchase Program: On July 7, 2021, LAKE stated that its Board of Directors had authorized a USD 5 million increase to the stock repurchase program announced on February 17, 2021, under which the company might repurchase up to USD 5 million of outstanding common shares.

H2 FY22 Results:

• The decline in Revenue: LAKE's net sales in H2FY22 (ended July 31, 2021) were USD 61.56 million, 23.63% lower than the USD 80.60 million recorded in H2FY21 due to weaker demand and direct container sales in the second quarter.
• Net Income drop: Net income for H2FY22 declined to USD 7.20 million from USD 17.97 million in H2FY21.
• Decent Balance Sheet: As of June 30, 2021, the company had cash & cash equivalents of USD 59.84 million with no outstanding debt.

Key Risks: Most of the LAKE's manufacturing activities are outside the United States, making them vulnerable to regulatory and trade concerns. As a result, any critical events, such as civil unrest, political instability, and government activities such as border taxes, currency valuation adjustments, and so on, might have a detrimental influence on the company's operations.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY23E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LAKE Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

LAKE's share price has declined by 28.02% in the past nine months and is currently trading in the lower-band of the 52-week range of USD 18.50 to USD 47.95. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 38.74. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 25.36.

Considering the company's market dominance, consistent track record, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 20.47, down 3.31% as of October 18, 2021.

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

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.