Am quite bullish. I had a fear that the FY Mar24 EPS might be missed, but it is now confirmed as coming in-line.
There was a big omission of any forward looking statements... which is worrying? H2 CCY growth was probably around +5% YoY, which is much lower than the +15% in H1.
However, I think the pork situation China is getting brighter, with firm forward pricing for lean hogs already starting to come through, so this should start crystallising in the SP in the next few months.
Crunching the numbers, I think a very conservative fair price estimate is 140p, and this is assigning zero value to the vaccines, only on the As-Is Aivlosin business. Hard to give a value to the vaccines as I state in my article above, but I can imagine that once the vaccines are more tangible, a 75-100p valuation add-on is sensible. So overall, thinking a 215p to 240p share price is achievable by mid/end 2025, which is only 18 months away, and a doubling of the current SP.
The Eco Animal Health (EAH) share price had plunged recently due to fears about further deterioration in China trading. Genus had released some bearish news recently that caused that. Also, pork prices had plunged in China in early Q1.
However, the latest TU suggests that trading was resilient, despite that headwind in China. Also, pork prices have had a strong recovery over March, so that headwind is much receded now.
I've decided to buy a position this morning, taking advantage of the depressed share price. I think they have two potential huge EPS growth drivers in the next 2 years: China recovery, as well as new vaccines. All it takes is just one of those two to come true, to power a re-rating in the share price here.
I'm afraid I'm not enough of an industry expert here to know where to begin to find branded vs generic volumes for Aivlosin!
My view is that generics have been a "threat" for several years now, but if they were to truly collapse Aivlosin revenues, it would have happened already in past years.
I do think that EAH being so dependent on Aivlosin, as a one-trick pony, is probably one of the biggest risks of owning this share. I see EAH not as a long term hold, but something I will probably sell in 2025, 2026.
For me, I'm not that attracted to the long-term structural aspect of the company, but rather what I saw a big valuation gap on China recovery (now looking like its starting, judging from latest outlook) as well as the vaccine NPD pipeline (progressing well, but still too early to count the chickens yet. Counting to start maybe Q4, Q1).
Thanks. Have not deep-dived into this, but the risk/reward for 1-2 years (ie. limited downside given FCF from Aivlosin and current EV/EBITDA levels excl. R&D) might be attractive with the potential trigger of new vaccines. As per the latest annual report, they also seem to de-risk to some extent with wider geographical reach offsetting cyclicality
Without the R&D investments I would assume dividends and/or buybacks and the metrics/ratios would have been good (without having done any calculations)
I've digested the latest TU at the end of Apr24.
Am quite bullish. I had a fear that the FY Mar24 EPS might be missed, but it is now confirmed as coming in-line.
There was a big omission of any forward looking statements... which is worrying? H2 CCY growth was probably around +5% YoY, which is much lower than the +15% in H1.
However, I think the pork situation China is getting brighter, with firm forward pricing for lean hogs already starting to come through, so this should start crystallising in the SP in the next few months.
Crunching the numbers, I think a very conservative fair price estimate is 140p, and this is assigning zero value to the vaccines, only on the As-Is Aivlosin business. Hard to give a value to the vaccines as I state in my article above, but I can imagine that once the vaccines are more tangible, a 75-100p valuation add-on is sensible. So overall, thinking a 215p to 240p share price is achievable by mid/end 2025, which is only 18 months away, and a doubling of the current SP.
Didn't realise a TU was coming out today!
The Eco Animal Health (EAH) share price had plunged recently due to fears about further deterioration in China trading. Genus had released some bearish news recently that caused that. Also, pork prices had plunged in China in early Q1.
However, the latest TU suggests that trading was resilient, despite that headwind in China. Also, pork prices have had a strong recovery over March, so that headwind is much receded now.
I've decided to buy a position this morning, taking advantage of the depressed share price. I think they have two potential huge EPS growth drivers in the next 2 years: China recovery, as well as new vaccines. All it takes is just one of those two to come true, to power a re-rating in the share price here.
Thanks for the write-up!
Can you provide some more information on how generic competition is impacting current revenues? I cannot find any information regarding this.
And do you know whether there are any substitutes for Aivlosin in the market?
I'm afraid I'm not enough of an industry expert here to know where to begin to find branded vs generic volumes for Aivlosin!
My view is that generics have been a "threat" for several years now, but if they were to truly collapse Aivlosin revenues, it would have happened already in past years.
I do think that EAH being so dependent on Aivlosin, as a one-trick pony, is probably one of the biggest risks of owning this share. I see EAH not as a long term hold, but something I will probably sell in 2025, 2026.
For me, I'm not that attracted to the long-term structural aspect of the company, but rather what I saw a big valuation gap on China recovery (now looking like its starting, judging from latest outlook) as well as the vaccine NPD pipeline (progressing well, but still too early to count the chickens yet. Counting to start maybe Q4, Q1).
Thanks. Have not deep-dived into this, but the risk/reward for 1-2 years (ie. limited downside given FCF from Aivlosin and current EV/EBITDA levels excl. R&D) might be attractive with the potential trigger of new vaccines. As per the latest annual report, they also seem to de-risk to some extent with wider geographical reach offsetting cyclicality
Without the R&D investments I would assume dividends and/or buybacks and the metrics/ratios would have been good (without having done any calculations)
I have yet to go through the annual report, but waiting to do so after the presentation later today.
But yes - I think if one strips out the R&D spending, I suspect the Aivlosin business is still a cash cow and highly profitable.
It shows up in the cash splits by geography; cash outside China up YoY, despite ALSO spending huge amounts in R&D for the vaccines.