Analyst Note| Karen Andersen, CFA |
We're slightly adjusting our fair value estimates for Grifols' B shares from EUR 19.20/$22.50 to EUR 19/$23 following the firm's 2020 financial results. Shares continue to trade at a steep discount to our valuation, as we think the market is focused on near-term COVID-19-related headwinds as Grifols struggles to collect enough plasma to manufacture its products during the pandemic. While the first quarter will likely continue to see similar headwinds as the fourth quarter of 2020, we assume collections could improve significantly in the second quarter of 2021, based on vaccination and infection rates in the U.S., a key collection market for Grifols. Grifols should benefit from organic growth in collection centers, as 15-20 new centers are scheduled to open in 2021. In addition, Grifols has made several deals that will help the firm reinvigorate growth once the worst of the pandemic subsides, including the March 2020 alliance with Shanghai RAAS to increase the plasma-derived protein market in China, the October 2020 acquisition of manufacturing plants in Canada and U.S.-based plasma collection centers, and a November 2020 deal with the Egyptian government meant to boost Middle East and Africa supply of plasma-derived proteins. We expect these investments to support strong supply of plasma and finished plasma products that will continue to support the firm's narrow moat in the plasma protein oligopoly, alongside global players CSL and Takeda.