With 65% of debt at a fixed rate and maturities in 2025, Grifols’ gearing could drop to 4.9x in 2023, 3.8x in 2024


Morgan Stanley | After a series of acquisitions Grifols’ debt has increased to 10 billion euros (7xND/Ebitda). That said, with 65% of debt at a fixed rate and maturities in 2025, we expect gearing to drop to 4.9x in 2023 and 3.8x in 2024 (thanks to a recovery in profits).

However, in the short term, with limited ways to reduce gearing, this is going to put pressure on the stock. The collections of plasma are returning to pre-Covid levels. And the re-opening of the Mexican border is also helping. That said, in the long term, the risk for earnings has increased due to:

(i) the lesser additive effect of incremental operations, ii) the US health reform.

In addition, two important franchises are attracting more competition (Alpha1 and IgG). We are cutting the target price to 13 euros from 20 euros, after lowering Ebitda estimates by 3% due to the rise in costs of plasma collection and the increase in WACC from 8 to 10%. Despite the valuation being attractive at 9x Ev/Ebitda, we maintain our Equalweight stance.

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