Analyst recommendation

                                                                                                           As at 11 March 2025

Executive Summary

1. Strong progress is being made in sterile capacity fulfilment. The company also bought a portfolio of products from
Viatris for R5.3 billion which will boost revenue. Future fulfilment of the remaining sterile capacity along with the
contracts from GAVI remains to be seen.
2. Key points in the investment thesis are:
a. Manufacturing continues to lag in the portfolio, primarily due to the heparin unwind which should improve in
the next two years. Revenue will decline in this segment; however, margins will improve.
b. Execution risks as the company relies on future contracts to drive growth. Management’s outlook beyond 2025
is optimistic, but achievable. Contracts will have to be negotiated on top of the Novo Nordisk, Eli Lilly, Viatris
and Amgen ones that have been signed.
c. Chinese volume-based procurement policy remains uncertain; however, management sees this mitigating post
2025.
d. Debt has been managed well in the past few years and should continue to see declines after the Viatris and
Sandoz’s acquisition.
e. The company is trading below its five-year average multiple and looks attractive at the moment. The doubledigit organic growth expected in the commercial segment is more achievable now following the Chinese VBP
issue, provided this does not continue in the future.
3. Have an intrinsic value of R206 per share (upside of 15%) and recommend a buy position
a. An estimated EBITDA of R15.1 billion with a WACC of 12.3%.
b. Forecasted revenue growth slightly ahead of consensus due to improved EBITDA margins.
c. Upside on the current share price of R180. Pipeline deals and spare capacity should see improved margins.
GLP-1 projects provide ample opportunity post FY26, however this remains uncertain at the moment.
4. What would make us change our minds?
a. Price is currently well below its five-year, two-year forward EV/EBITDA average of 8.3x, however, if they don’t
deliver on their guidance this could be warranted.
b. Failure to achieve fulfilment of the sterile capacity and EBITDA margins not improving to closer to 29%.

Analyst thesis

Results

On 03 March 2025, Aspen released its H1 FY25 financial results for 31 December 2024.
1. Total sales increased by 4% to R21.9 billion, up by 9% when adjusted for currency.
2. EPS (cents) increased by 3% from 520.8 (cents) in December 2023 to 537.7 (cents) in December 2024.
3. EBITDA margins increased from 24.6 to 26.5% as the company unwinds an inventory backlog of Heparin.
4. Aspen will restructure Sandoz's China business in the second half of 2025 to enhance its capacity and flexibility
for future opportunities and challenges 

Valuation

Table 3: Valuation

Table 6: Valuation multiples

Source: FactSet