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30 Oct 2020
KABI overshadows Helios
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KABI overshadows Helios
Fresenius SE & Co. KGaA (FRE:ETR) | 0 0 0.0%
- Published:
30 Oct 2020 -
Author:
Dormois Julien JD | Solvet Hugo SH -
Pages:
11
3Q20 print a touch better than expected
Fresenius reported sales up 5%cc to EUR8.9bn, in line with consensus, driven by HELIOS Spain recovering faster than expected and offsetting a weak performance at KABI. EBIT at EUR1.1bn (12.5% margin) and net Income of EUR427m (+1%cc) came in 1% and 2% ahead of consensus respectively, driven by FME.
FY20 guidance narrowed to the low end is not a surprise
During the conference call, the CFO stated that achieving the low-end of the FY20 sales and net income growth guidance (3-6%cc and -4/+1% respectively) was the most likely scenario given the weakness at KABI and VAMED. The FY20 guidance assumes that any additional covid-related impact will be compensated for by the government.
KABI: a case of deja-vu?
Supply constraints at KABI followed an FDA inspection at the Melrose Park facility (IL). All the FDA''s comments have been answered and all batches that were held back are ''clean''. However, their gradual release in the course of 4Q20 will be a drag on KABI''s performance. Prior to 2015, FRE could not manufacture new products at its Grand Island (NY) facility following FDA objections and a downgrade of the facility''s status. This is not the case at the Melrose Park facility.
Helios back on track
Helios Spain has recovered sharply and is on track to be back at pre-covid levels in 4Q20. The state of alarm reinstated in Spain last week gives more flexibility to hospitals to treat non-covid patients. In Germany, the Hospital Future Act makes 4Q19 financial performance a floor for Helios.
Reiterate O/P. Even on more conservative estimates it still offers significant upside
We were already at the low-end of the FY20 guidance and we now move to the bottom end. Our new TP stands at EUR50 (vs EUR55). Fresenius shares trade at a P/E of 9x, a 60% discount to EU MedTech.