Berenberg upgraded Haleon today …5 Jun 2024 19:20
Berenberg initiated coverage of consumer health company Haleon on Wednesday with a 'buy' rating and 407.0p price target, stating that its investment case was based in part on the US launch of Eroxon, which it expects to drive better-than-expected organic sales growth of 5.8% in 2025.
Berenberg said the opportunity from the US launch of Eroxon - the first-ever over-the-counter erectile dysfunction topical cream - was "substantial". It noted that among men of all ages, 20% suffer from ED, but the condition was more pronounced in older age groups, as 50% of over 40s experience ED.
"Importantly, 80% of men who suffer from ED are not taking any treatment, meaning the addressable market for Eroxon is significant," it said. "We conservatively estimate that the US rollout will improve group organic sales by an average of 0.8pp in its first five years (2025-29). We note that there are already encouraging signs from the rollout of Eroxon in the UK and Belgium, with the brand gaining 20% share in its first 12 months."
The bank's investment case was also based on Haleon's exposure to attractive categories that it expects to grow 4.6% in the medium term, above Berenberg's forecast sector average of 4.1%; and the stock trading on a valuation discount of 17% to key household and personal care (HPC) peers. Berenberg also noted that Haleon trades on a 12-month forward price-to-earnings of 17.3x.