Aspen Pharmacare Holdings Limited (JSE: APN) reported solid results for the six months ended December 31, 2023, despite a 6% decline in headline earnings per share. Revenue grew 10% to R21.1 billion, driven by a 3% rise in Commercial Pharmaceuticals and a 33% surge in Manufacturing. The company successfully navigated challenges like VBP (Volume Based Procurement) in China and loss of grant funding, exceeding its guided performance and achieving a 2% increase in normalised EBITDA to R5.2 billion.
A key strategic shift involves transitioning the Heparin business to a toll manufacturing model, reducing inventory investment and boosting cash flow. Additionally, partnerships like the distribution agreement with Lilly in Sub-Saharan Africa and the product purchase agreement with Viatris for Latin America are expected to fuel revenue growth in H2 2024.
Looking ahead, Aspen anticipates mid-single-digit growth in normalised EBITDA for FY2024. The company expects H2 2024 revenue to be bolstered by R1 billion, driven by organic growth, acquisitions, and the mitigation of the impact of VBP in China. The successful commercialisation of the mRNA filling contract and a strong second half from the API business are further catalysts for growth.
Technical Analysis
The daily chart shows that Aspen’s share is trading around the 23.60% Fibonacci retracement after breaking below the 50-SMA in the previous session. The share price trades comfortably above the 100-SMA (orange line) and 200-SMA (red line) and just below the 50-SMA (blue line), with the shorter-term 50-SMA trading comfortably above both the 100-SMA and 200-SMA.
With the recent below the 23.60% Fibonacci retracement level-enforced-50-SMA, a sustained push lower could find support at the 38.20% Fibonacci retracement level (19,059 cents). A sustained break below the initial support might bring the 50.00% Fibonacci retracement level (18,493 cents) into play, with the 61.80% Fibonacci retracement level (17,927 cents) acting as the next level of significance lower.
However, with the RSI (52.33) trading above the 50.00 level suggesting bullish inclination, a push back above the 50-SMA would leave the 20,890 cents and 21,550 cents resistance firmly within the bulls’ reach in the near term.
Summary
Aspen Pharmacare’s trajectory is emblematic of a company at the cusp of strategic expansion and financial resurgence. Its adept navigation of industry complexities, coupled with a well-articulated growth strategy, positions it favourably for future prosperity. Technically, while recent price action hints at short-term challenges, the overall setup favours a rebound, with significant levels to watch, including the 19,059 cents support and the 20,890 cents resistance in the near term.
Sources: TradingView, MT Newswire, Reuters, Aspen, MarketScreener.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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