UBS lifts Polypeptide to “buy” as Braine Reactor spurs outlook upgrade

Investing.com -- UBS in a note dated Thursday upgraded PolyPeptide Group AG (SIX:PPGN) to a “buy” rating from “neutral” following progress at its Braine-l’Alleud site.

Shares of the Swiss company were up 8% at 08:40 ET (12:40 GMT).

While the company’s first-half profitability fell short of expectations, management forecast a significant improvement in the second half of the year as the new reactor in Braine ramps up, prompting a revision of full-year 2025 sales guidance toward the upper end of the previous range. 

UBS estimates 2025–2027 sales, EBITDA and EPS to rise on average by 3%, 6% and 19%, respectively, compared with prior forecasts.

The Braine reactor, tied to a large-scale GLP-1 contract worth about €100 million annually, reached break-even in the first half and is on track to achieve target utilization rates by the end of 2025. 

UBS noted reduced risks for subsequent capacity expansions, lifting its medium-term revenue and EBITDA compound annual growth rate forecasts to 17% and 61%, respectively, for the period through 2028.

Four commercial agreements underpin the company’s 2028 revenue target of €640 million, including another metabolic product contract in Malmö expected to reach similar volumes as the Braine deal. 

UBS forecasts 13% sales growth in the second half of 2025 and an EBITDA margin of 17%, up from 12% in the same period last year.

Despite improving profitability, substantial capital expenditures are expected to weigh on cash flows. 

UBS projects about €367 million in capital spending over 2025–2028, equivalent to about 20% of sales, resulting in negative free cash flow until 2028. 

Management reiterated that equity financing is not planned, with funding to come from customer prepayments and debt, and UBS sees the net debt-to-EBITDA ratio falling from 1.5x in 2025 to below 1x in 2028.

UBS raised its 12-month price target to CHF32 from CHF19, based on a discounted cash flow valuation using a lowered weighted average cost of capital of 8.6% from 9%, and kept terminal growth at 2%.

The valuation reflects higher mid-term forecasts and improved visibility from the Braine ramp-up.