Brokers back hVIVO's long-term vision

Shore Capital maintains a 'buy' rating on hVIVO PLC despite a recent contract setback, citing the company's potential to reach £100 million in revenue by FY28 through diversification away from lumpy HCT contracts; ShoreCap believes management should reaffirm these ambitions to restore investor confidence. hVIVO's discounted valuation, trading at approximately nine times FY26 estimated enterprise value to EBITDA, increases the likelihood of acquisition interest in a consolidating sector. Peel Hunt is also supportive, setting a 21p price target, while hVIVO anticipates potential deals in late 2025 to mitigate the contract impact in FY26.

Analysis

Shore Capital maintains a 'buy' recommendation for hVIVO PLC (AIM:HVO), despite a recent contract setback, emphasizing the company's strategic ambition to achieve £100 million in revenue by financial year 2028. This target is viewed as increasingly attainable through diversification from more volatile Human Challenge Trial (HCT) contracts, although Shore Capital suggests management should reaffirm or reframe these goals to bolster investor confidence. The company's shares are currently trading at a significant discount to industry peers, approximately nine times its estimated financial year 2026 enterprise value to EBITDA, a valuation gap that Shore Capital believes could attract acquisition interest, particularly given hVIVO's unique HCT business operating within a fragmented market ripe for consolidation. Sustained share price weakness is seen as a potential catalyst for bid interest. Supporting this outlook, Peel Hunt has reiterated a 21p price target, substantially above the current trading price of 8.64p, and notes hVIVO's expectation that new opportunities materializing in late 2025 could mitigate the recent contract impact on financial year 2026 performance.

Key Decisions for Investors

• Investors should consider the significant undervaluation relative to peers and Peel Hunt's price target, alongside the positive broker sentiment, which suggests potential upside despite recent setbacks.
• Monitor management communications closely for reaffirmation or adjustments to the £100 million FY28 revenue target, as this will be crucial for restoring investor confidence.
• Factor in the heightened possibility of M&A activity given the company's discounted valuation, unique market position, and the consolidating nature of its sector, which could serve as a catalyst for share price appreciation.
• Assess the risk associated with the recent contract setback against the company's stated high probability of securing new deals in late 2025 to backfill and mitigate the impact on FY26.