GSK- Downgrade to Hold - Value Trap (HOLD, PT £14.00)
We upgraded GSK predicated on the OTC spin which we believed could unlock some value and felt the valuation was undemanding. However, we are now in year 4 of the GSK turnaround & we see little evidence of material R&D progress whilst at the same time we have had to downgrade our 2021 EPS materially and see further headwinds from Established Products and from higher R&D and S&M investments. Therefore, the risk is that any benefit from the split could be eroded by further operational weakness. Given that the 2022 dividend cut has now been flagged, the floor on the shares has also been removed and the very significant dependence on Shingrix is now evident. D/GRADE to HOLD.For access to the full note, please contact Naresh Chouhan ( )
GlaxoSmithKline is a global healthcare company. Co.'s segments include: Pharmaceuticals; Vaccines; and Consumer Healthcare. The Pharmaceuticals segment is focused on developing new medicines in respiratory, HIV, oncology and immuno-inflammation, with discovery research exploring these and other areas. The Vaccines segment has a portfolio and pipeline of vaccines to help protect people throughout life. Co. delivers vaccines to people living in over 160 countries. The Consumer Healthcare segment develops and markets consumer-preferred brands in oral health, pain relief, respiratory, nutrition/gastro-intestinal and skin health.
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