Valuation analysis

11-NOV-2024

Actual company guidance: 2024: 415 MUSD revenue (S24) and net income 120 MUSD (E24), 2025: 465 MUSD (S25), 165 MUSD net income (E25)

Market cap of 5.35 BUSD (P) at 22.62/share: P/S24 = 12.9, P/E24 = 44.6, P/S25 = 11.5 and P/E25 = 32.4)

My assumptions:

ADMA will be highly profitable due to high ratio of hyperimmunes (maybe eventually they will only manufacture hyperimmunes if S. pneumonia is successful and provided they can source the required amount of hyperimmune plasma). CSL (its large peer) has 11% FCF and 17% net profit margin but most of the revenue is not generated from high margin hyperimmunes and a lot of revenue not even from IgG. CSL trades at P/FCF = 35, P/S = 7, P/E = 35-40 which seems expensive as CSL grows much slower than ADMA)

I assume ADMA can generate 1 BUSD in revenues by 2029 (S29) with FCF margin 35% (FCF29 = 350 MUSD) and net profit margin of 30% (E29 = 300 MUSD)

To be conservative let me assume lower multiples for ADMA in 2029 than CSL currently has, although ADMA may still have a higher growth rate than CSL currently has:

P/S29 = 6 --> market cap of 6 BUSD

P/E29 = 25 --> market cap of 7.5 BUSD

P/FCF29 = 25 --> market cap of 8.75 BUSD

Let us take the average and say ADMA's market cap will be around 7.5 BUSD which means around 40% higher than current market cap of 5.35 BUSD --> approx. 7% annualized return from current price --> not a market beating return with above multiple assumptions

Reverse discounted cashflow at current TTM revenue of 383 MUSD at 35% FCF --> 134 MUSD --> revenue needs to grow 16%/y over next 10 years to justify current price (if ADMA gets to 1 BUSD of revenue by 2029 --> growth of 21%/year) --> currently undervalued

All in all, I am not selling my shares. However, I may start trimming as valuation is not as favorable anymore as 6-12 months back. Further, ADMA mgt announced potential yeld improvements of 20% which are not yet included in guidance. If such yield improvements are achieved this will be almost pure profit in addition. So current 383 MU