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Ebos Group Ltd - Stock Quote EBO

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Morningstar's Ebos Group Ltd Stock Analysis

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EBOS’ FVE Up 6% as Its Higher-Margin Businesses Improve, but Shares Remain Expensive

Shane Ponraj, CFA Equity Analyst

Analyst Note

| Shane Ponraj, CFA |

We raise our fair value estimate for narrow-moat EBOS by 6% to AUD 27.50 (NZD 30.00) following interim fiscal 2022 results. This was largely driven by increasing our midcycle gross margin forecast for consumer logistics to 13.5% from 11.5% prior and our revenue forecasts for community pharmacy and institutional healthcare by 7% and 3% on average over our five-year forecast period, respectively. However, shares remain overvalued with the market likely extrapolating EBOS’ current growth rate which we believe is being buoyed by abnormal tailwinds.

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Ebos Group Ltd's Company Profile

Business Description

EBOS is the largest pharmaceutical wholesaler and distributor across Australia and New Zealand. It services community pharmacies and hospitals, which contribute around 60% and 30% of revenue respectively. Drug pricing and wholesale margins for PBS medicine are governed by the Australian government’s Pharmaceutical Benefits Scheme, or PBS. Wholesale gross margins are capped at 7% for community pharmacy and 10% for hospitals, and ongoing price reform typically results in low single digit revenue growth. Aside from pharma distribution, EBOS operates an animal health product wholesale, manufacturing and retail business, as well as undertaking third party logistics services. These segments run at 5% and 8% of revenue respectively but due to the unregulated nature are higher-margin operations.

108 Wrights Road, P.O. Box 411
Christchurch, STL, 8024, New Zealand
T +64 33380999
Sector Healthcare
Industry Medical Distribution
Most Recent Earnings
Fiscal Year End Jun 30, 2022
Stock Type
Employees 3,700