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On Wednesday, Barclays (LON:BARC) updated the rating for Bachem Holding AG (BANB:SW) stock, shifting from Underweight to Equalweight, though reducing the price target to CHF65.00 from the previous CHF71.00. The revision comes after considering the company's recent market performance and its position in the industry.
Bachem Holding AG, a company specializing in the manufacture of peptides and complex organic compounds, has seen its shares decline by 34% since mid-July, a steeper fall compared to the 8% drop in the SXDP index during the same period. The downgrade in valuation during December was attributed to the initial disappointment from the NOVO Cagrisema data, which was seen as indicative of the demand for next-generation peptides.
Despite the recent underperformance, Barclays suggests that the current valuation of Bachem Holding AG is more aligned with its market position, especially after factoring in the expected strong demand and high utilization of the company's future capacity. The analyst points out that Bachem's growth prospects, market exposure, and expansion projects warrant a premium valuation.
The firm's evaluation is based on a discounted cash flow (DCF) model, which now uses fiscal year 2025 as the base year. This adjustment reflects a premium to peers at approximately 24 times enterprise value to next twelve months (EV/NTM) EBITDA and around 18 times EV to next two years (EV/N2Y) EBITDA. These figures are 57% and 44% higher, respectively, than the general CDMO peers and also 24% higher than Bachem's own five-year average inflated by COVID-19.
The updated price target implies about a 16% potential upside from the current levels, which has led to the upgraded rating to Equal Weight. Barclays acknowledges Bachem Holding AG's superior growth profile and its standing in the market, while also recognizing its expensive valuation in comparison to its peers.
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