Stable growth in a turbulent year

Q1 2024 consolidated results

4 June 2024

  • Revenues from sales of manufactured medical products increased by BGN 43.3mln to BGN 509.1m, compared to BGN 467.2m in Q1 2023.
  • Sales growth for Q1’24 in the domestic market marked 7.7%. As per data from IQVIA, Sopharma has the 15th largest share in the market responsible for 1.99% of the supply in nominal terms, while it holds the 2nd largest share with 6.78% with regards to volume (amount of meds). The positions of the main competitors are as follow: Roche – 5.21% (0.30% vol), Merck – 4.97% (0.12%), AstraZeneca – 4.64% (0.49% vol), Novartis – 3.84% (1,13% vol), Swixx Biopharma – 3,80% (1,17% vol), Pfizer – 3,67% (0,67% vol), Abbvie – 3,58% (0,08% vol), Teva – 3,13% (8,15% vol), Stada – 2,85% (4,39% vol), Johnson & Johnson – 2,80% (0,82% vol). The highest sold products are Analgin, Vicetin, Famotidine, vitamin C, Paracetamol, Methylprednisolone.
  • EBITDA increased marginally by 0.9% to BGN 45.9mln and Net Profit marked a slight decline of 1.2% to BGN 31.4mln.
  • Internationally, growth was recorded in Georgia (24%), Azerbaijan (69.7%), Uzbekistan (6.1%), Vietnam (111.9%), Moldova (72.8%) and Poland (59%). Declines were in Ukraine (15.6%), Belarus (19%), Russia (16.1%) and Kazakhstan (2.8%).
  • OPEX increased 13%. In that, COGS had the largest contribution increasing by BGN 42.3mln or 12.4%. Materials added BGN 4.3mln or 18% and external services another BGN 3.7mln or 19% (mainly due to increase in marketing expenses). Personnel expense added BGN 6.3mln or 15.4% and is the result of the overall increase of the low and mid level employee compensation to keep up with the inflation.
  • The company attracted additional BGN 31.1mln long term debt (BGN 24.2mln bank loans and BGN 6.9mln leasing) and BGN 69.9mln short term debt (BGN 73.3mln bank loans and a decrease of BGN 3.9mln in leasing) in Q1 2024 compared to Q1 2023. This, combined with the decrease in Cash, resulted in Net Debt increasing from BGN 247.3mln to BGN 338.3mln over the year.
  • The income from FX positions and interest from loans was not enough to compensate the growth in interest expenses as the company attracted more debt. The net financial income went down by 44% to BGN 2.7mln.
  • The increase in the debt was the sole reason for the increased long term liabilities from BGN 131.2mln to BGN 151.9mln in Q1 2024. In short term liabilities, besides the big increase in ST loans mentioned above, the liabilities towards subsidiaries gave the biggest push with BGN 97mln bringing the account to BGN 102.7mln. The real majority of that are liabilities for dividends and they represent over 95% of the account. This is the situation as well with the third largest contributor, other short term liabilities, which added over BGN 50mln to the account – 69% of it are dividend liabilities.
  • The 24% increase in Current assets is due to the other short term assets account, which shows mostly the deposited cash with the Central Depository to ensure the dividend payments. Additionally, noticeable increases are marked in materials – 22% to BGN 361.6mln and trade receivables – 22.3% to BGN 310.7mln.

Ivaylo Valchev
Equity Analyst
Tel.: +359 2 937 9862
e-mail: valchev@sis.bg

Svetozar Abrashev
Senior Managing Partner
Tel.: +359 2 937 9869
e-mail: abrashev@sis.bg

Sofia International Securities
Sofia 1000,
140 G. S. Rakovski Str.
Tel.: + 359 2 937 98 65
e-mail: info@sis.bg

Disclaimers and Required Disclosures

Sofia International Securities AD is a member of Bulgarian Stock Exchange (BSE) and the Central Depository of Bulgaria. The company provides brokerage, investment banking, equity research, portfolio management and other services. Sofia International Securities AD is regulated by the Financial Supervision Commission of Bulgaria.

Analyst Certification
The individuals responsible for the preparation of this report certify that: (1) all of the views and opinions expressed in this report are their own and reflect their personal views about the issuer(s) and the securities subject of this report, and (2) no part of any analyst’s compensation was, is, or will be directly or indirectly related to the specific views or recommendations expressed by them in this report.

Regulatory Restrictions
Sofia International Securities is not registered as a broker or dealer with the Securities and Exchange Commission or NASD in the United States of America and the information may be distributed in the US only to individuals who by acceptance hereof confirm that they represent “major institutional investors” as defined in Regulation 15a-16 of the Securities Exchange Act of 1934. Notwithstanding this, no publication of Sofia International Securities AD shall be construed as an offer (or solicitation of an offer) in any jurisdiction in which such offer or solicitation would be illegal.

Financial Interest
Sofia International Securities may or may not own shares of the company that is subject of this document. The individuals who are responsible for the preparation of this report may or may not own shares of the company that is subject of the report. Sofia International Securities is not a market maker in the securities that are subject of this document. In the past, Sofia International Securities might have provided corporate services to the company that is subject of this presentation and may seek to provide such and other services in the future. As of the date of this document Sofia International Services provides brokerage services to the company subject of this document.

Equity Valuation and Risks
The value estimate(s) stated in this report is (are) valid only in light of the valuation methods used to derive this estimation. The use of other or more comprehensive approaches could result in other estimates of value that could diverge substantially from the results presented herein. With regard to the above, when making our conclusions about the intrinsic value of the Company’s share capital, we have not considered or evaluated any possible tax, legal or other effects that might arise from engaging in transaction(s) with the shares of the company. The document should not be regarded by recipients as a substitute for the exercise of their own independent judgment and they should seek and obtain independent investment advice is necessary. Any facts and/or information stated in this document are subject to change without notice and Sofia International Securities is not under any obligation to update or keep current the information contained herein. Any opinions expressed herein are only correct as of the stated date. Past performance is not indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any security.

General
The report is prepared solely for informational purposes and is not to be construed as a solicitation, recommendation, investment advice or an offer to buy or sell any securities or related financial instruments. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. The document is based on information obtained from sources believed to be reliable but Sofia International Securities do not warrant its accuracy, nor that it is a complete summary of the securities, markets or developments referred to in the report. This report does not intend to provide assurance on the value of the company’s shares or on the achievability of the projections, statements and assumptions used by us. Actual results achieved in future periods might differ substantially from the projected ones because events and circumstances frequently do not occur as expected. Sofia International Securities accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. Additional information will be made available upon request.