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Investing.com - JPMorgan has upgraded Aspen Pharmacare Holdings Ltd. (JSE:APN) stock rating from Underweight to Neutral, raising its price target slightly to ZAR121.00 from ZAR120.00. According to InvestingPro data, the company maintains a "Fair" overall financial health score, despite recent challenges. The stock currently trades at $5.92, with a market capitalization of $2.58 billion.
The pharmaceutical company experienced a challenging fiscal year 2025, with normalized headline earnings per share falling approximately 30% and its share price declining about 50%. Revenue and earnings were significantly impacted by the loss of the mRNA vaccine contract, while the strengthening South African rand undermined reported profits. InvestingPro analysis shows the stock is currently trading below its Fair Value, with revenue reaching $2.45 billion in the last twelve months. Subscribers can access 8 additional ProTips and detailed financial metrics on the platform.
Free cash flow suffered from higher intellectual property investments, particularly for generic GLP-1s, and ongoing working capital challenges. The weak cash flow resulted in higher-than-expected net debt of R31 billion, with leverage (net debt/EBITDA) reaching 3.2x, forcing the company to cut its dividend. Despite these challenges, the company maintains a healthy current ratio of 2.21 and trades at a notably low Price/Book ratio of 0.54, according to InvestingPro data.
JPMorgan noted a significant mismatch in Aspen’s financial structure, with approximately 47% of revenue generated in euros and rand, but only about 3% of EBITDA coming from these currencies. The company’s manufacturing facilities in France and South Africa are currently underutilized following contract losses.
Aspen plans to right-size its cost base at these facilities, aiming to restore manufacturing EBITDA to fiscal 2024 levels by 2027, supported by the ramp-up of its Novo Nordisk insulin contract in South Africa. The company also expects its Commercial Pharma business to benefit from restructuring actions taken in the second half of fiscal 2025 related to integrating the Sandoz business into Aspen China.
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