Our opinion on the current state of APN

Aspen Pharmacare Holdings Limited (APN), a leading pharmaceutical company, operates globally, distributing its products across 150 countries. The company's diversified product range targets various acute and chronic medical conditions, with a focus on thrombosis, anaesthetics, cytotoxics, and nutritionals. Aspen's extensive manufacturing footprint includes 25 facilities spread across 15 sites, underscoring its capacity to cater to a wide market demand.

The pharmaceutical industry is traditionally seen as defensive, maintaining stability even during economic downturns, given the essential nature of chronic medication. For Aspen, one significant external factor influencing its performance is the strength of the rand, which impacts its earnings from international markets. Looking ahead, Aspen anticipates its interests in China to surpass its operations in South Africa, highlighting a strategic pivot towards emerging markets, which now constitute a major part of its business focus.

In the reporting period ending 31st December 2023, Aspen announced a revenue increase of 10% while observing a 6% decrease in headline earnings per share (HEPS). This financial performance reflects a mixed outcome, with Commercial Pharmaceuticals revenue growing by 3% (a 3% decrease in constant exchange rate, CER) and Manufacturing revenue surging by 33% (17% CER). Despite this revenue growth, the shift towards a higher Manufacturing sales mix has somewhat muted gross profit growth, which stood at 4% (a 3% decrease in CER). Normalised EBITDA experienced a modest rise of 2% (a 5% decrease in CER) to R5.194 billion, indicating the nuanced financial dynamics within the company.

Aspen's Price-to-Earnings (P:E) ratio of 14.5 presents it as an attractive investment, particularly considering its solid international presence and status as a rand-hedge share. The confidence in Aspen's potential is further reinforced by significant share purchases by CEO Stephen Saad and Deputy Gus Attridge, who have invested approximately R110 million in the company, signaling their belief in the undervalued nature of its shares.

Investors looking at Aspen as a potential addition to their portfolio were advised to wait for the stock to break its long-term downward trendline. This technical breakout occurred on 1st September 2022 at around R156 per share. Following a period of lateral movement, the share price experienced a significant uptrend, reaching R203.78. This movement suggests a positive momentum for Aspen, positioning it as a promising investment opportunity for those seeking exposure to the pharmaceutical sector and emerging markets, coupled with the added advantage of rand-hedge benefits.