The outlook for the sector in the short term is very mixed. Sort between an addiction leader, a test manufacturer, a laboratory, an animal health specialist and a medical equipment supplier!
Star of the markets in 2020 with technology, the health sector experienced a more timid start to the year.
Since 1is January, the CAC Health Care index – which includes the main health stocks listed on Euronext – rose 3.5%, while the general practitioner SBF 120 gains 4% over the period. Some values are struggling, others remain highly sought after.
Here are three stocks to put in your portfolio and two that are better to sell.
Korian: the horizon is clear
The group of retirement homes has weathered the health crisis well. Its turnover increased by 7.2% last year, to 3.87 billion euros. Organic growth reached 2%. Activity accelerated in the fourth quarter as sales increased 10.9%.
The progress of the vaccination of the elderly or frail against Covid-19 augurs a continuation of this trend in 2021, even if the leaders do not risk setting themselves financial objectives for the moment. They nevertheless confirm their ambitions for 2022, that is to say a turnover of over 4.5 billion euros and a gross operating surplus (EBITDA) margin of 15.5% of sales. , compared to 13.9% in 2020.
Korian At the same time, continues to strengthen its real estate portfolio, which now stands at 2.67 billion euros. Enough to guarantee the majority of its net debt, which amounts to 3.16 billion euros. The group has also just established itself in the United Kingdom.
The uncertainties linked to the pandemic have lowered the stock by 26% in one year. Trading 21 times the expected net earnings per share (BNA) at the end of 2021 and 16.9 times that expected at the end of 2022, it seems undervalued to us.
Our advice: buy Korian. [KORI]
Novacyt: the craze for testing dries up
Medtech is one of the values that has benefited the most from the health crisis. Over one year, the action Novacyt wins 515%! After hitting an all-time high on January 25, at 13.62 euros, the title gradually fell back to 8 euros. The company was able to quickly position itself in the Covid-19 diagnostic test market with a range that it recently extended to variants. Its turnover has multiplied by more than twenty last year, reaching 311.6 million euros.
Novacyt is expected to benefit from demand for its products again this year, but its revenues are likely to decline sharply when the pandemic is brought under control.
The Factset consensus is counting on a 2% increase in its turnover in 2021, then on a fall of 44% in 2022. Admittedly, the leaders do not count on resting on their laurels and are counting on a strategy to diversify their activity . They should detail their plan in the second quarter.
In the immediate term, it seems preferable to us to take profits on this stock, with a view to possibly returning to it if the new strategy of the company proves to be convincing.
Our advice: sell Novacyt. [ALNOV]
Ipsen: good surprises are possible
The shareholders of the pharmaceutical company must have had their hearts set on these past few years.
After hitting a historic high above 150 euros in September 2018, the action Ipsen suddenly fell below 35 euros in March 2020. It is currently trading at 71 euros. Clinical setbacks, change of CEO, new strategic plan… the group has initiated a transformation that seems convincing to us.
As of this year, it could sell its declining family health activity, which represents less than 10% of turnover and is home to Smecta in particular. This would increase its cash flow with a view to making acquisitions in the more promising field of specialty medicine (oncology, neurodegenerative diseases, etc.).
Despite the pandemic, Ipsen’s sales grew 3% last year (at constant currencies), to 2.59 billion euros. The current operating margin increased by 1.6 percentage points to 32% of sales. Executives are targeting sales growth of over 4% this year (at constant currencies) and a current operating margin of over 30%. The group’s flagship drug, the anticancer drug Somatuline, could in our opinion resist better than expected in the face of competition from generics.
In addition, regulatory decisions concerning Cabometyx and Palovarotene could this year increase the Ipsen share if they are positive. Especially since the valuation is attractive: barely 9.6 times the expected net profit per share at the end of 2021. The group plans to pay a dividend of 1 euro per share this year, like last year.
Our advice: buy Ipsen. [IPN]
Guerbet: while waiting for the resumption
The activity of the medical imaging specialist suffered last year from the postponement of many non-priority radiological examinations and interventions in the context of the Covid-19 pandemic. Its turnover thus fell by 12.8% in 2020, to 712.3 million euros. Even if this year could be better, in particular thanks to the deployment of vaccines against the coronavirus, visibility is poor on the evolution of the activity.
Because in addition to the uncertainties about the pace of “return to normal”, Guerbet has faced competition for more than two years from a generic of its flagship contrast product, Dotarem, in Europe. However, a generic could also very soon overshadow it on the American market.
The action drops 11% over one year and 55% over three years. It trades 12.5 times the expected net earnings per share at the end of 2021, and 10.8 times that expected at the end of 2022. Certainly, this means that analysts expect higher profits in the coming years.
But while waiting to learn more about the progress of the 2023 strategic plan for leaders, it is safer to stay away.
Our advice: sell Guerbet. [GBT]
Virbac: at the bedside of animals
The animal health specialist is benefiting from the resilience of its market. Last year sales of Virbac showed a limited decline of 0.4% to 934.2 million euros. At constant scope and currencies, sales even increased by 5.7%.
This year, the managers are aiming for a 3% to 5% increase in turnover (at constant exchange rates and perimeter), as well as a gross operating surplus margin (EBITDA) of between 10% and 12% of sales, compared to around 14% estimated for the year ended. This drop in profitability is mainly due to the sale of the Sentinel antiparasitic range and is expected to be temporary. The group is deleveraged, which allows it to consider acquisitions and internal investments.
Leaders are usually cautious when setting goals. It would not be surprising if, like last year, they exceed them. The annual results will be unveiled on March 17 and could be a catalyst for this title which is down nearly 14% since the 1is January.
Its valuation is demanding: 30.4 times the expected net profit at the end of 2021 and 26.9 times that expected at the end of 2022. But it does not seem excessive for a growth stock positioned in a booming market.
Our advice: buy Virbac. [VIRP]
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