First Berlin – ADVA Optical Networking SE Research Update (05/11/2019)

First Berlin Equity Research has published a research update on ADVA Optical Networking SE (ISIN: DE0005103006). Analyst Simon Scholes increased the price target from EUR 8.50 to EUR 8.60 but downgraded the stock from Buy to Add.

Sales climbed 14.4% to €144.3m in Q3/19 (FBe: €137.5m; Q3/18: €126.2m) and were 9.5% ahead after nine months at €405.7m (9M/18: €370.5m). Proforma Q3/19 EBIT was €7.4m (FBe: €6.6m; Q3/18: €6.8m), equivalent to 5.1% of sales. The numbers were above our forecasts and also towards the upper end of Q3 guidance which was for sales of €135-145m and a proforma EBIT margin of 3%-6%. Sales growth was achieved with support from all technologies, but three expected future growth drivers, namely the recently launched FSP 3000 Teraflex, 5G rollout, and NFV (network function virtualisation), have still to kick in with substantial revenue contributions. This increases our confidence that sales growth at ADVA will remain buoyant. We raise the price target to €8.60 (previously: €8.50) but lower the recommendation from Buy to Add to reflect recent share price appreciation.