Should you invest in Russian healthcare? – ForTrader.org financial magazine


In Russia, the number of people over 44 is growing sharply: by 2035, their number will grow from 60 to 69 million people. 44 years is a borderline age, after which the consumption of medical services and drugs grows in leaps and bounds. Among the public health companies in the Russian market are Mother and Child and Pharmsintez.

Is it worth investing in healthcare now? What profit and in what time frame can it bring? Nikolay Dudchenko, an independent financial analyst, answered a question from Fortrader magazine.

– The past 2020 has become quite successful for companies from the healthcare industry. Most likely, 2021 will also be no exception. At the same time, there is a certain trap here – the fact is that when investing in the shares of these companies, it is important to understand that the current “fat” time for such companies will not always last and in the future for 2-3 years investors may face a decrease in the growth rate of financial indicators simply because of the high base effect. Consider two healthcare companies that demonstrated excellent revenue results in 2020 – Mother and Child and Pharmsynthez.

Valuation analysis of companies

Let’s compare the companies “Mother and Child” and “Pharmsynthez” in terms of key fundamental metrics, namely, consider the situation in terms of debt burden, revenue growth and net profit, dividend payments, and profitability.

Assessing the debt burden of companies, it can be noted that both companies have a rather low level of debt load. This is a positive investment factor. By the way, the Pharmsintez company in 2019 had a significantly lower debt burden than Mother and Child, however, by 2020 the companies were practically equal in this indicator.

Debt level

Now let’s look at the situation in terms of the growth of key financial indicators, namely, revenue, EBITDA and net profit.

Growth rate of revenue
Growth rate of revenue

Revenue growth rates speak, as they say, for themselves. The Mother and Child company demonstrates fairly stable performance, while Pharmsintez had two disastrous years – 2018 and 2019, when the revenue growth rates became negative. The past “crisis” 2020 is very indicative in terms of analysis, which led to a significant increase in the financial performance of pharmaceutical companies.

EBITDA growth rate
EBITDA growth rate

Pharmsintez’s EBITDA has remained negative for a fairly long period of time. At the same time, Mother and Child’s EBITDA continues to grow steadily.

Net profit growth rate
Net profit growth rate

Mother and Child had only one unsuccessful year in terms of net profit growth – 2019. The rest of the time, the company is growing in terms of net profit. We were especially pleased with the latest reports for 2020. The growth was almost 60%. At the same time, Pharmsintez has a higher rate of revenue growth, but its net profit is still negative (-500 million in 2020).

Let’s analyze what is happening with the indicators of companies’ profitability.

Considering that Pharmsynthez is showing negative net profit, it is not yet possible to assess it by return on equity. Based on ROE Mother and Child, the company’s management is quite effective.

ROE indicator
ROE indicator

Naturally, under such conditions, Pharmsintez is unable to pay dividends. At the same time, the “Mother and Child” dividend policy is quite stable.

Dividend Yield
Dividend Yield

Finally, let’s look at the P / E ratio of Mother & Child. The average is 13.5.

conclusionsthat can be done are self-explanatory. Investing in shares of the company “Mother and Child”, no doubt, at the moment looks more attractive. The company demonstrates both strong growth in revenue and net profit, as well as high profitability and dividend yield indicators.

Libertex [CPS] WW

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