However, after the recent drop in the share price we see an excellent buying opportunity, with a 43% upside potential. The EBITDA weakness in 1Q26 is temporary and we expect a significant improvement already in 2Q26. The fundamentals for further revival of the CRO market remain strong. Moreover, the recent discount of comparable companies was mainly due to company‑specific factors, which also weighed on Selvita’s share price.
The weakness in 1Q26 is temporary and presents a good buying opportunity
Selvita released weak preliminary data for 1Q26, with over 40% drop in EBITDA to 10‑13 million PLN, prompting us to lower our forecasts for this year. 1Q26 brought only a temporary weakness (probably due to longer negotiations with clients and the IPO market rebuilding only since February 2026) and does not significantly affect our medium‑term forecasts.
The order book suggests improved results in 2Q26, with revenues of 91 million PLN and EBITDA of 18 million PLN. The rebuilding of the CRO market remains our key assumption for 2H26, due to: 1) still good prospects for biotech companies to raise capital, 2) optimistic SLV comments regarding current contracting.
The fundamentals of CRO market rebuilding are solid despite the war in Iran
The U.S. biotech index (XBI) rose 1% since the start of the war in Iran and remains close to multi‑year highs (~50% above the 3‑year average). Biotech IPOs on NASDAQ reached record levels in 1Q26, and after a brief slowdown in recent weeks, two new IPO applications (Kailera and Alamar) appeared in 2Q26, each over 100 million USD.
This should support further rebuilding of biotech financing, and consequently CRO backlogs. Nevertheless, we acknowledge that risk has increased, and the prolonged war in Iran may increase risk aversion and worsen sentiment toward the industry.
Valuations of comparable companies are burdened by company‑specific factors
Valuations of comparable companies for Selvita have been under strong pressure since the beginning of the year, but we note that the decline in valuations largely stems from company‑specific factors. These include:
1) higher than expected restructuring costs at Evotec,
2) asset divestiture and CEO change at Charles River,
3) AI threat to 40% of IQVIA’s revenue,
4) accounting investigation at ICON. In the absence of similar risks and with better growth prospects, Selvita’s current P/E of 24x (falling to 9x in 2028F) is seen as an opportunity.
