Analysts at RBC Capital Markets lowered their target price on veterinary drugmaker Dechra Pharmaceuticals from 4,200.0p to 4,000.0p on Thursday following the group’s full-year results a week earlier.
RBC Capital Markets said it had updated its model on Dechra after the results and to also reflect the firm’s major acquisitions of Piedmont and Med-Pharmex.
For the 2023 and 2024 trading years, RBC said it was roughly 3.2% and 5.1% ahead of consensus on revenue, respectively, and 3.9% and 6.8% below on earnings per share estimates.
However, the Canadian bank said it sees “meaningful improvements” in the medium term with a 2023-26 earnings per share compound annual growth rate of 52%, and believes recent deals have “greater merit” than just the numbers alone, increasing Dechra’s intrinsic value.
“We value Dechra in 18 months using a FY23e P/E of 29x and EV/EBITDA of 20x. These represent a 10% (from 15%) discount to market leader Zoetis due to Dechra’s smaller size and lower growth rate,” said RBC, which reiterated its ‘outperform’ rating on the stock.
“This leads to a fair value of £36 to which we add our risk-adjusted valuation of £4 for Dechra’s novel portfolio pipeline, for a total of £40 (from £42 previously) with the move in PT driven mainly due to lower valuation multiples from peers.”
Reporting by Iain Gilbert at Sharecast.com
