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GRIFOLS: 1Q’21 RESULTS AND T.P. CUT (ANÁLISIS BANCO SABADELL)

1Q’21 vs. 1Q’20 Results:
Sales: € 1.185 Bn (-8.4% vs. -4.3% BS(e) and -5.6% consensus);
EBITDA: € 296.8 M (-15.5% vs. -18.1% BS(e) and -17.9% consensus);
EBIT: € 212.95 M (-22.2% vs. -18.9% BS(e) and -17.0% consensus);
Net Profit: € 129.9 M (-30.2% vs. -39.6% BS(e) and -35.8% consensus).
The 1Q’21 results beat expectations on the operating level, with sales underperforming. EBITDA on the quarter came in slightly above expectations (-15.5% vs. -18.1% BS(e) and -17.9% consensus) thanks to more favourable margins (+30bps vs. 4Q’20 to 25% vs. 23.2% BS(e) and 23.6% consensus), which offset the weaker sales performance (-8.4% vs. -4.3% BS(e) and -5.6% consensus; -0.9% LfL). Along these lines, we highlight the bigger drop in Bioscience sales on the organic level (-5.6% LfL), which stood at -5.6% vs. -1% BS(e), and which we think should be a floor level for the year, to be followed by a gradual improvement in upcoming quarters. Net Profit fell -30% to € 130 M (vs. € 112 M BS(e) and € 119 M consensus), due mainly to the updated value of the stake in GigaGen (€ 35.5 M), which was not included in our estimates and helped offset worse financial costs (€ -59 M vs. € -49 M BS(e)).
Net debt rose +8.5% to € 6.2 Bn (5.1x NFD/EBITDA vs. 4.5x in 4Q’20) compared to our estimate of € 6.07 Bn, due to the impact from the recent M&A moves totalling €~505 M (among which we highlight the acquisition of 32 plasma collection centres from BPL and Kedrion, as well as the GigaGen and Alkahest deals) and working capital expansion (€ -89 M).
In short, the 1Q’21 results were slightly better than expected on the operating level, and awaiting an improvement in sales (which we expect to come with the rise in vaccination numbers) they could lead to a positive reception, bearing in mind the stock’s lacklustre recent performance (+3% since 4Q’20 results; -4% vs. IBEX) and the fact that it has underperformed the market by -22% since Feb’20 highs. Following these results, we cut our estimates by -11% in EBITDA and -12% in Net Profit for the 2021-23 period, leaving a CAGR’20-23 of +4.6% in sales and +11% in EBITDA. We also roll our model over, with a total impact of -8.9% on the T.P., which falls to € 34.00/sh. (+50% upside), meaning we maintain our BUY recommendation. Our revision reflects lower plasma supply levels in Bioscience (~80% sales) and a deterioration of EBITDA margins by around -160bps, brought about by the increased remuneration given to plasma donors (between +20% and +30% BS(e)).
In any event, as we have stated we still think GRF will be a clear winner as vaccination levels rise, and we expect rapid recovery starting in 2H’21 (after 3 quarters hit by lower plasma supply), which would benefit from the recent acquisition of 32 new plasma collection centres (an additional +10%) and the robust underlying demand. Thus, we expect 2021 sales to be practically flat (+1.1% vs. 2020), whereas starting in 2022 we expect normalised growth rates of +6.4% annually in sales. Separately, our estimates include an exchange rate of 1.22 USD/EUR for this year (GRF generates ~70% of sales and ~80% of costs in USD BS(e)), and its performance will be a burden on the 1H’21 results, which should ease throughout 2H’21. Note that GRF benefits from a strong dollar, and according to our estimates, changes of ±1% in the EUR/USD exchange rate would have an impact of ±0.6% on the T.P.
The important drivers in the short term (AMBAR in phase III with the EMA and phase 2b with the FDA for Alzheimer’s; 25% of the T.P.), along with the stock’s lacklustre performance (-21% since the pandemic broke out; -27% vs. IBEX) have left GRF trading at a heavy discount vs. CSL (-51% vs. -27% historically), whose business has been less affected by Covid-19 and, in our view, has plenty of upside.