Compass (CPG LN) & BAE Systems (BA/ LN)
Consumer Discretionary / Industrials
Willis Welby looks at UK growth names (>$2.5bn M/Cap) that have not shared in the share price rises since Oct 26th. CPG has seen analyst downgrades despite a robust update during Nov, but looks like a very strong compounding story that is not expensive and makes great sense at current prices. However, it is BAE that really stands out. The defence contractor has seen upgrades to consensus Y2 EBIT over the last three months and more recently has announced more good news on orders. Relative to US peers that implied to Y3 EBITM ratio of <60 looks way too low. Other stocks discussed in their report include AstraZeneca and Games Workshop.
Edition: 176
- 22 December, 2023
UK Healthcare: Value funds drive underweight
Healthcare now stands as the third largest underweight risk to UK investors (behind Consumer Staples and Energy) driven by two key factors: 1) AstraZeneca positioning. The net underweight of -2.62% accounts for more than the net underweight of -2.36% for the entire sector. Overweights in Smith & Nephew, ConvaTec and out-of-benchmark Sanofi provide the partial offset. 2) Value Fund positioning. Active UK Value managers are seemingly happy to let underweights increase, with a huge gap of -6.27% vs. the FTSE All Share weight. Value managers are banking on some serious underperformance.
Edition: 151
- 06 January, 2023
Sanofi (SAN FP) France
Healthcare
Start of a multi-year EPS upgrade cycle - SAN is the most obvious Buy since AstraZeneca in its early transformation several years ago - Intron shows there is 11% CAGR EPS growth (2021-26), 6% CAGR sales growth, a burgeoning pipeline driven by a transformed R&D engine, commercial excellence and discipline in M&A. 10% of 2026 EBIT will come from new launches that Intron estimates will sell €2.7bn by 2026. Despite this, SAN trades on just 11.2x 2023 EPS, a 30% discount to peers. TP €135 (45% upside).
Edition: 129
- 18 February, 2022
BioPharma R&D Supercycle
Healthcare
Using Intron’s extensive proprietary database of 617 drug approvals and the outcome of 404 P3 assets, they show concrete evidence that the rate of innovation across the BioPharma industry is accelerating. They believe it’s almost impossible that the sector isn’t making a supernormal ROI on R&D. Based on the burgeoning output of the industry Intron shows that EU Big Pharma still looks undervalued. Their top picks are Sanofi, AstraZeneca and Novo Nordisk.
Edition: 128
- 04 February, 2022
EU Pharma: The forgotten sector
Healthcare
Sector fundamentals have been materially enhanced since Covid struck with sales set to grow 5% CAGR 2021-26 and net income 7% CAGR. Moreover, drug output has been consistently high for most companies. This enhanced output has come due to a decade of investment which is now normalising and should allow margins to grow by 300bps over the next 5 years. Despite this, current share prices imply terminal growth rates are negative even as the background level of innovation is accelerating. Sanofi, AstraZeneca and Novo Nordisk are Intron’s top picks for the next 12 months.
Edition: 122
- 29 October, 2021
Pharma ESG: A sector specialist’s view
Intron Health Research’s latest report shows clear evidence that typical Pharma ESG ratings bear little resemblance to mid-term share price performance. They have therefore designed an ESG framework unique to the industry; governance is at the forefront of the model whilst social factors have a lower weighting. They show that AstraZeneca and Novo Nordisk fare the best, and GlaxoSmithKline and Roche fare worst.
Edition: 119
- 17 September, 2021
GlaxoSmithKline (GSK LN) UK
Healthcare
Disputing Elliott Advisors’ 45% upside - Intron's SOTP analysis explains why this is unlikely to occur within the timeframes proposed. GSK Pharma (ex-ViiV) would have to trade on 59x 2022 PE and CHC on 30x 2022 PE whilst ViiV would have to trade on 12x 2022 EPS despite the DTG patent expiry in ~6 years. However, Intron does support Elliott’s view that the board needs more industry knowledge; plus the incentivisation scheme needs a major overhaul in-line with the most innovative companies in the sector such as Novartis and AstraZeneca.
Edition: 114
- 09 July, 2021