(News Bulletin 247) – The German bank downgraded its sell advice on Tuesday and slashed its target price to 3 euros on the stock of the former Sanofi subsidiary. Deutsche Bank believes that visibility remains low on the issue.

Euroapi drinks the chalice to the dregs on the Paris Stock Exchange. And it is not the latest note from Deutsche Bank which will help the former Sanofi subsidiary to get back on its feet. The German bank downgraded its sell advice this Tuesday morning and halved its price target to 3 euros compared to 6 euros previously.

The design office is more than harsh on Euroapi in its note. He was not convinced by the presentation, last week, of the strategic review of the specialist in active pharmaceutical ingredients.

Euroapi not immune to new disappointment

Deutsche Bank does not hide its disappointment over “the lack of quantitative details” concerning the FOCUS-27 project, the strategic plan unveiled by Euroapi and which is intended to improve its growth. This program provides for the elimination of 13 active pharmaceutical ingredients with low or negative margins, as well as the rationalization of the company’s industrial footprint.

The financial intermediary recalls that the former Sanofi subsidiary should reveal more details on cost reduction objectives, financing and potentially new medium-term objectives during the second quarter of 2024. However, Deutsche Bank estimates that Europapi’s announcements will not arouse overwhelming enthusiasm.

On the contrary, Euroapi could still disappoint with a potential “downside risk for consensus margin expectations for 2024-2027”, warns the research office.

Overall, Deutsche Bank is not optimistic about the matter. According to the bank’s analysts, operational visibility remains low, and restructuring expenses and capex needs (capital expenditures, editor’s note) could lead to additional cash needs of around 70 million euros until 2027 (or even around 170 million euros without inventory reduction), potentially resulting from dilutive financing.

Taking all of this into account, the financial intermediary expects the shares to underperform, leading it to lower its recommendation to sell this Tuesday morning.

On the Paris Stock Exchange, the sanction is immediate since the Euroapi stock shows the biggest drop in the SBF 120 with a drop of 8.2% around 11:20 a.m. Tuesday morning. The day before, the title of the former Sanofi subsidiary had already lost 5.20%.

This decline seems anecdotal if we compare it with the heavy stock market loss suffered by Euroapi last Thursday, in reaction to a very disappointing publication. It was above all the prospects announced by the company which gripped investors, the stock having plunged by 43.33% on Thursday.

From disappointment to disappointment…

For 2024, Euroapi forecasts a decline in its sales of between 4% and 7% on a comparable basis, when the consensus was on the contrary forecasting growth of 2.5%. This drop in activity is linked to the expected decline in sales to Sanofi. On the profitability side, Euroapi also expects a deterioration and therefore expects a “core Ebitda” margin – i.e. the gross operating profit restated for certain elements such as restructuring costs – of between 6% and 9%. . Here again we are far from the consensus which anticipated a margin of 11.2%, Deutsche Bank indicated in a previous note.

Euroapi also seems to be prone to disappointments, de facto leading to heavy stock market sanctions. In October 2023, Euroapi had plunged by 59% in one session in October, following a previous profit warning, and by 21.8% in March 2023 after an (already) disappointing publication.

With a decline of almost 40%, Euroapi has to date the third worst performance of the SBF 120 index since the start of the year. Only Atos (-69.30%) and Nexity (-40.6%) stocks are doing worse after having also recently stunned investors. And if we go back to the IPO in May 2022, the results are even less flattering for Euroapi with a title which has plunged by 70% compared to the price of 12 euros used for the operation.