Roche - Downgrade to HOLD (HOLD, PT CHF300)
Due to numerous revenue headwinds in 2023, we forecast Roche Group sales to decline 2% and have 0% EPS growth. With limited pipeline catalysts & a very difficult H123, we doubt Roche can outperform its peers. However, our analysis of the gross margin shows that we expect it can be protected despite the revenue decline. The mix improves as well as the potential for further cost containment. We see lower wage inflation risk than those of peers given the high Swiss exposure where inflation is modest. We see the potential for a strong 2024, but downgrade to HOLD given near-term challenges.Roche Holding is a healthcare company. Co. operates in two Divisions, Pharmaceuticals and Diagnostics. Co.'s pharmaceuticals division is comprised of two business segments Roche Pharmaceuticals and Chugai. Co.'s pharmaceuticals division provides therapies including Cotellic, in combination with Zelboraf for advanced melanoma, and Alecensa for a specific type of lung cancer. Co.'s diagnostics division consists of four business areas: Diabetes Care, Molecular Diagnostics, Professional Diagnostics and Tissue Diagnostics. Co.'s diagnostics division provides in vitro diagnostic tests, used by healthcare providers to screen, diagnose and monitor therapies.
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