ADL Bionatur: betting on a stellar 2020

We have just published an update on ADL Bionatur, where we continue to see exciting prospects and a reasonable valuation.

These are our reasons:

• ADL Bionatur sales growth continues to be driven by a hungry customer base that demands fermentation capacity to fulfil its own production requirements. We now expect sales to rise by 44% in 2020, on top of a 100% increase in 2019

• The 2019 financial resource bottleneck has delayed the execution of its customer order backlog, but momentum remains unabated. ADL Bionatur has recently signed a €25 million (+€5 million) 4-year financial instrument to enable the financing of the next stage of capacity expansion and working capital requirements.

• Despite the resulting financial debt increase to €65 million, we believe it to be sustainable once the fermentation starts to run at full capacity. We expect Ebitda/Financial Cost ratio to reach 3.7x in 2021, even with the 12% interest rate on the new debt facility.

• In recent weeks, ADL Bionatur has announced new contracts (Japanese pharma company) and contract extensions (Amyris) that underpin our confidence in our sales growth projections. The management continues to demonstrate its ability to create value by acquiring its customer base anywhere in the global marketplace.

In our report, we look for a 47% upside in our 12 month target price of €3.20. We expect the market to begin to focus on the outlook for 2020 once the 3Q19 results are announced and we come close to the calendar end of the year.