Tuesday, November 28

5 days of relief at Grifols

Grifols it has experienced a stock market martyrdom since the beginning of the pandemic. But the slow realization that the omicron variant causes less severe symptoms than its predecessors, together with the generalized rebound in the markets during the last part of December, invites optimism.

The company’s stocks have gained 6.2 percent in the past five days and it is looking to end a year of heavy losses on a positive note.

The Catalan pharmaceutical company has suffered a correction of 30.2 percent so far in 2021, beset by a drop in the supply of plasma as a result of restrictions and a fear of contagion that caused a decrease in the number of people who they went to blood collection centers.

This bad moment has led Grifols to have a price per share of around 17.1 euros as of December 28, which is one of its worst prices since December 2014, but the consensus of analysts is confident of its recovery since this minimum.

12 months ahead, the target price assigned to the securities of the Spanish listed company is 25.49 euros, and 14 out of 22 analysts recommend buying their securities, with only one of them underweighting the shares despite giving it a target price of 18 euros that is above its current price.

Grifols’ debt continues to weigh

Income 4 analyst Álvaro Aristegui, for example, recommends overweighting the asset based on “a gradual improvement in the results that should be seen in the valuation, despite the current market concern over the company’s high indebtedness” .

The concern around Grifols’ debt has caused the company to intensify its presence in the acquisitions market in recent months, precisely with the intention of reducing its treasured leverage and convincing analysts and the market alike of its viability.

The company explained in the announcement of its financing agreement with the Singaporean fund GIC last June, that its intention is to repay a debt that at the end of the first semester, when the company presented its latest accounts, amounted to 6,476 million euros, with a debt / ebitda ratio of 4.9 times.

Aristegui pointed out, however, that in Renta 4 the rationale for the operation has never been shared with GIC, “since at the same time that the funds obtained from the sale will serve to reduce the debt on the balance sheet, other payment commitments […] even much more expensive than the same debt they are replacing. “

The expert of the bank refers, of course, to a bond issue for 2,000 million that he carried out Grifols to finance the purchase of the German company Biotest.

One more sale to alleviate the leverage

The high accumulated debt and the market’s suspicion of this acquisition of Biotest have forced Grifols to make cash, and given the need to continue disinvesting, the company announced on December 15 the signing of an agreement for the sale of its 87 percent stake in the company VCN Bioscience.

According to the statement published by Grifols, this agreement values ​​87 percent of the capital of VCN Biosciences at up to 75 million dollars that is expected to enter the box of the pharmaceutical company in the first quarter of 2022, once all the regulatory approvals.

“The sale of VCN Biosciences to Synthetic Biologics it reflects Grifols’ commitment to its divestment plan in non-strategic business lines, “the company statement said.

Additionally, Grifols announced its intention to buy back up to 867 million euros of bonds from two different debt issues, which is also part of this debt reduction program.

The rally can be very beneficial

Aristegui gives a neutral assessment to the news of the divestment in VCB Biosciences, alleging that despite being part of the company’s divestment strategy, the low amount of the transaction, together with the conditions for its collection and the agreed schedule , “it will not have an impact on indebtedness in the medium term.”

The Grifols price, however, improved in the days immediately after the announcement, and has continued with this upward pace during these last weeks of the year.

Little by little, the pharmaceutical company is managing to change its mind to a market that has penalized it throughout 2021, and now seeks to squeeze a growth potential that can reach up to 70 percent.