Emerging from the Fog (30 pages)
AZN has finally returned to sales growth and reached trough earnings making it a consensus buy. However, we show that there is still significant upside as growth has been de-risked, pipeline success has been bountiful, sales will grow by $6bn by 2021, quality of earnings improve rapidly & there is a pathway to 40% 3yr TSR. Our novel valuation values the base business at £55 & NPV the pipeline at £5. Our new PT is £60.Growth Coming From All Angles – We show that sales grow by $6bn over just the next 3yrs and detail the product-by-product drivers. This growth translates into a 12% EPS CAGR.
Earnings Quality to Fully Recover – Externalisation and OOI fall from 44% of 2018 earnings to just 13% in 2021. In 2014 before the out-licensing strategy, OOI was 17% of earnings.
3yr TSR Could Hit 40% – With 21% EPS growth 2018-20, retaining the 2018 PE (20x today) & a 4% dividend yield, we see a pathway to 40% TSR. We conservatively value the base business (excluding P3 pipeline assets) at £55 (15x 2020 EPS) & NPV the pipeline at £5 which offers 24% upside.
AstraZeneca is a holding company. Through its subsidiaries, Co. operates as a biopharmaceutical company engaged in discovering, developing, manufacturing and commercializing its pipeline of small molecule and biologic prescription medicines, including targeted business development through collaboration, in-licensing and acquisitions. Co. is focused on three main therapy areas: Oncology, Cardiovascular and Metabolic Diseases, and Respiratory. Co. is also selectively active in autoimmunity, infection and neuroscience. In addition, Co. works across small molecules, oligonucleotides and other drug platforms, as well as biologic medicines.
Provided by our team of experienced analysts, our work is idea driven, based on independence of thought, sector expertise, and firmly focussed on fundamentals and valuation.
New Street Research is an independent, partner-owned, research firm specialising in equity and debt research. Our equity research embraces the following sectors:
- Pan European Telecom Services and Cable
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- Global Emerging Market Telecoms
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- Pan European Telecom Services and Cable
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