On Monday, Deutsche Bank updated its assessment of Sandoz Group AG (SIX:SDZ:SW) shares, increasing the price target to CHF36.00 from the previous CHF33.00. The firm has maintained its Hold rating on the stock.
The adjustment follows Sandoz's strong third-quarter sales performance, which was reported on October 30, 2024, and showed a consistent execution path and a slight increase in the full-year 2024 revenue guidance.
The analyst from Deutsche Bank noted that the updated projections include a 1% rise in the 2024 revenue forecast and a slight adjustment to the EBITDA margins to align more closely with the company's guidance of around 20%. This change in expectation comes after earlier statements in the year that were less clear.
The improved earnings before interest, taxes, depreciation, and amortization (EBITDA) estimates for the near and mid-term have been increased by a mid-single-digit percentage, leading to the lifted price target.
Sandoz's price target is now set based on a forward price-to-earnings (P/E) ratio of 15 times the estimated earnings for 2024. This valuation is considered high but aligns with the return to average multiples seen in U.S. generics peers, which range from mid to high single-digit P/E and a 10 times enterprise value to EBITDA (EV/EBITDA) ratio.
Despite the positive performance and the raised stock price target, Deutsche Bank's stance remains cautious due to the limited visibility in the company's financials, the predominantly generics-based product mix, and the significant difference perceived between the core and IFRS (International Financial Reporting Standards) earnings per share (EPS).
These factors contribute to the firm's decision to maintain a Hold rating on Sandoz Group AG shares.
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