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GlaxoSmithKline PLC ADR

Recommendation: Buy

Entry Date Symbol Recommendation Entry Price (USD) Target 1 (USD) Target 2 (USD) Holding Duration Potential Upside*
5 Feb, 25 GSK Buy USD 34.84 USD 37.98 USD 40.76 21 days 17.0%

*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.

Fundamentals

  • Previous Close 37.87
  • Market Cap75048.04M
  • Volume1883589
  • P/E Ratio9.73
  • Dividend Yield3.85%
  • EBITDA9186.00M
  • Revenue TTM29652.00M
  • Revenue Per Share TTM14.66
  • Gross Profit TTM 19917.00M
  • Diluted EPS TTM3.75

Data Powered by EOD Historical Data (“EODHD”).

Company Overview

GSK plc, together with its subsidiaries, engages in the research, development and manufacture of vaccines and specialty medicines to prevent and treat disease in the United Kingdom, the United States, and internationally. It operates through four segments: Pharmaceuticals, Pharmaceuticals R&D, Vaccines, and Consumer Healthcare. The company offers pharmaceutical products comprising medicines in the therapeutic areas, such as infectious disease, HIV, immunology and respiratory, and oncology. The company was formerly known as GlaxoSmithKline plc and changed its name to GSK plc in May 2022. GSK plc was founded in 1715 and is based in Brentford, the United Kingdom.

Key Positives

Core Earnings Per Share (EPS) Growth: Core EPS increased by 10%, reflecting strong performance in Specialty Medicines and disciplined investment in R&D.

Specialty Medicines Growth: GSK experienced strong sales growth in Specialty Medicines, with a 19% increase in total sales, driven by a 98% rise in Oncology sales and a 13% increase in HIV sales.

Key Negatives

Vaccines Sales Decline: Overall vaccine sales decreased by 4%, with significant drops in sales for Arexvy (-51%) despite a slight increase in Shingrix (+1%).

Total Operating Profit Decline: Total operating profit decreased by 33%, mainly due to a £1.8 billion charge related to the settlement of the Zantac litigation.

Key Investment Risks

Key investment risks for GSK include potential setbacks in its ongoing litigation, particularly related to Zantac, fluctuations in vaccine sales, and the execution risks associated with its large and complex R&D pipeline.

Recommendation Summary

Technical Summary

Entry Price Support* Target 1 Target 2
34.84 30.31 37.98 40.76

Data Source: REFINITIV, Analysis: StockNextt

*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.

Key Reasons for Buy

  • Solid Financial Performance in 2024: GSK reported robust financial results for 2024, with total sales reaching £31.4 billion, a 3% increase at actual exchange rates (AER), and a 7% increase at constant exchange rates (CER). The company’s specialty medicines segment saw impressive growth, with sales up 19%, driven by a 13% rise in HIV sales, a remarkable 98% increase in oncology, and a 13% growth in respiratory/immunology and other products. However, vaccine sales declined by 4%, primarily due to a 51% drop in sales of Arexvy, despite a 1% increase in Shingrix sales.
  • Core Profit Growth Despite Litigation Charge: While total operating profit declined by 33%, largely attributed to a £1.8 billion charge related to the settlement of the Zantac litigation, GSK’s core operating profit increased by 11%. This growth was fueled by strong performance in specialty medicines and a disciplined approach to increased investment in research and development (R&D). The company also saw a 10% rise in core earnings per share (EPS), reflecting a solid foundation for continued profitability.
  • Impressive Cash Flow and Shareholder Returns: GSK demonstrated strong operational efficiency, generating £8 billion in cash from operations and achieving free cash flow of £3 billion. In line with its commitment to returning value to shareholders, the company declared a Q4 2024 dividend of 16p per share, bringing the total dividend for the year to 61p per share. GSK also announced a £2 billion share buyback program to be executed over the next 18 months, reinforcing its commitment to enhancing shareholder returns.
  • Strong R&D Progress and Pipeline Expansion: Research and development efforts continued to make significant strides in 2024, with 71 specialty medicines and vaccines now in clinical development, including 19 in phase III/registration. The company achieved 13 positive phase III readouts in key therapeutic areas, including respiratory, immunology, oncology, and infectious diseases. Furthermore, GSK pursued strategic acquisitions and research alliances, including the acquisition of IDRx, Inc. (focused on GI cancers), Aiolos Bio (asthma), and a collaboration with Flagship Pioneering (respiratory and immunology).
  • Guidance for 2025: Looking ahead to 2025, GSK expects continued growth, with turnover anticipated to increase by 3% to 5% and core operating profit and core EPS projected to grow by 6% to 8%, including the expected benefits from the share buyback program. Specialty medicines are expected to drive growth, with a low double-digit increase in turnover, while vaccines are forecast to decline slightly. General medicines are expected to remain stable.
  • Long-term Growth Outlook and 2031 Sales Target: GSK has revised its long-term growth outlook, now anticipating sales exceeding £40 billion by 2031, up from the previous estimate of £38 billion. This adjustment reflects the progress made in its late-stage pipeline, including the anticipated contributions from products like Blenrep, as well as additional launch opportunities in the 2025–2031 period. The company continues to expect strong growth throughout the 2021–2026 period, with sales growing at a compound annual growth rate (CAGR) of more than 7% and core operating profit increasing by over 11%. GSK remains confident in its ability to drive future growth through its early-stage pipeline and strategic business development initiatives.

As per the above-mentioned price action, recent key business and financial updates, and momentum in the stock over the last month, a ‘Buy’ rating has been given to GSK plc (NYSE: GSK) at the closing market price of USD 34.84 as of February 04,2025.

Key Financials in Pictures

Income Statement

Balance Sheet

Change in Cash

Total Operating Cash

Dividends Paid

Data Powered by EOD Historical Data (“EODHD”).

Peer Comparison

Sector: Healthcare Industry: Drug Manufacturers - General

Company Change (USD) Price (USD) Trailing PE (x) Forward PE (x) Price Sales TTM (x) Price to Book Value (x) Enterprise Value to Revenue (x) Enterprise Value to EBITDA (x)
GSK
GlaxoSmithKline PLC ADR		 -0.435 1.15% 37.44 9.73 9.15 2.53 4.51 3.14 9.68
LLY
Eli Lilly and Company		 5.61 0.70% 810.84 78.14 31.95 16.34 45.83 16.65 54.36
JNJ
Johnson & Johnson		 1.46 0.95% 154.71 29.17 14.33 3.74 5.18 3.80 15.22
ABBV
AbbVie Inc		 -1.81 0.88% 204.46 61.52 14.86 5.62 51.62 6.76 20.58
MRK
Merck & Company Inc		 -1.05 1.21% 86.07 59.83 12.33 4.50 6.47 4.94 23.79

Data Powered by EOD Historical Data (“EODHD”).

Disclosures:

Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 04, 2025. The reference data in this report has been partly sourced from REFINITIV.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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