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ADCOCK INGRAM HLDGS LTD

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AIP trade ideas

Our opinion on the current state of ADCOCK(AIP)Adcock (AIP) is a leading supplier of pharmaceuticals to both the private and public sectors in South Africa, with diversification into India and other sub-Saharan countries. The pharmaceutical industry in South Africa is heavily influenced by the government's "single exit price" (SEP) mechanism, which determines the price for each type of medicine. In 2019, Adcock was only permitted to increase its prices by 1.3% on regulated medicines. This "cost-plus" pricing approach limits the company's ability to generate significant profits by pricing at market rates, and it also makes the company vulnerable to fluctuations in the strength of the rand, particularly since some ingredients are imported. To secure government contracts for supplying medicines, Adcock has achieved level 1 B-BBEE empowerment status for its continuing operations. Bidvest holds a controlling interest in Adcock (50.1%) and effectively controls its board of directors. Bidvest has been attempting to sell this interest to a Black empowerment entity but has faced challenges, as no potential buyers have sufficient capital to acquire the share for R4.8bn. In response to the constraints imposed by the SEP mechanism, Adcock is exploring diversification into unregulated products, such as baby care products, to reduce its reliance on the regulated pharmaceutical market. In its results for the year ending 30th June 2024, Adcock reported revenue growth of 6% and headline earnings per share (HEPS) growth of 10%. The company attributed its success to a strong trading performance coupled with excellent cost control, which facilitated double-digit HEPS growth. Additionally, strong cash generation allowed the company to return value to shareholders, including the repurchase of 6 million shares and a 10% increase in dividends. Technically, the share had been in a long-term downward trend that ended in September 2021. A breakout above the long-term downward trendline occurred on 3rd September 2021 at a price of 4548c, and since then, the share price has risen to 6596c. Given its defensive nature and current valuation, with a P:E ratio of 10.7, Adcock appears to be a solid investment for private investors.
JSE:AIP
by PDSnetSA
Our opinion on the current state of AIPAdcock Ingram (AIP), a prominent player in South Africa's pharmaceutical sector, serves both the private and public healthcare markets, with extended operations in India and other Sub-Saharan African countries. The company's pricing strategy is significantly influenced by the government's "single exit price" mechanism, which tightly regulates medicine pricing, limiting Adcock's ability to adjust prices based on market demand. In 2019, this mechanism allowed only a 1.3% price increase on regulated medicines, a factor that has constrained the company's profitability, especially considering the importation of certain medicinal ingredients that make it susceptible to currency fluctuations. To secure government contracts, Adcock has attained a Level 1 B-BBEE empowerment status, aligning with South Africa's broader socio-economic objectives. Bidvest, holding a 50.1% interest, effectively controls Adcock's board, although efforts to divest this stake to a Black empowerment entity have been hampered by financial constraints among potential buyers. In an effort to circumvent the limitations imposed by the single exit price mechanism, Adcock is diversifying its product range to include baby care products and other unregulated items. This strategic shift aims to leverage market-driven pricing opportunities and reduce dependency on regulated pharmaceutical sales. For the six months ending on 31st December 2023, Adcock reported a modest revenue increase of 1% and a slight improvement in headline earnings per share (HEPS) of 1.1%. This period saw a 5.0% decline in organic volumes, attributed to challenging market conditions, supply chain disruptions, and reduced sales from ARV tenders. The gross margin also experienced a decrease, primarily due to higher costs associated with foreign exchange rates for imported products. Nonetheless, the company managed to reduce operating expenses by 2.5%, indicating effective cost control measures. From a technical perspective, Adcock's share price had been in a downward trend, which reversed in September 2021. The share price break through the long-term downward trendline on 3rd September 2021 at 4548c marked a potential turnaround, with the share price subsequently climbing to 5250c. This recovery suggests that Adcock may be a solid investment option for private investors, particularly given its current price-to-earnings (P:E) ratio of 9.35, which is attractive for a defensive stock in the healthcare sector. Overall, Adcock Ingram's strategic diversification, cost management efforts, and the potential for a rebound in share price position it as an appealing investment, especially for those seeking exposure to the healthcare industry's defensive characteristics amidst regulatory and market challenges.
JSE:AIP
by PDSnetSA
$JSEAIP - Adcock Ingram: Another Choppy, Steady ClimberSee link below for previous update. Adcock did not take off on the good interim results in the last update. The technical picture is still the same and the stock has advanced very little in just under a year. I am neutral on this stock as it is clear overlooked by the market and its price action is very choppy. The stock is still displaying upward trend characteristics though of higher highs and higher lows with price neatly contained in an upward sloping channel.
JSE:AIP
by Loyiso_BlaqueSoros_Mpeta
Our opinion on the current state of AIP.Adcock (AIP) is a leading supplier of pharmaceuticals to both the private and public sector in South Africa. It has also diversified to India and other sub-Saharan countries. The business that Adcock is in is dominated by the government's "single exit price" mechanism which determines the price for each type of medicine. In terms of this, Adcock was only permitted to increase its prices by 1,3% on regulated medicines in the 2019 year. The problem with this "cost-plus" approach to pricing is that it does not allow the company to make significant profits from pricing at what the market will bear. Since some of the ingredients of medicines are imported, it also makes the company vulnerable to the strength of the rand. To win government contracts to supply medicines, the company has achieved level 1 B-BBEE empowerment status for its continuing operations. Bidvest obtained a strong interest in the company (50.1%) and basically controls its board of directors. Bidvest is trying to sell this interest to a Black empowerment entity but claims that none of them have sufficient capital to buy the share for R4,8bn. Now the company wants to diversify away from the single exit price mechanism by moving into baby care products and other products which are unregulated. In its results for the year to 30th June 2023 the company reported revenue up 5% and headline earnings per share (HEPS) up 12%. The company said, "We welcome the recent 'top-up' SEP adjustment of 1.73%, following the 3.28% increase granted in January 2023, which will assist in alleviating the margin pressures on our price-regulated basket of products". Technically, the share was in a long-term downward trend which came to an end in September 2021. We suggested that you wait for this break up through the long-term downward trendline. The break came on 3rd September 2021 at 4548c. Since then the share has moved up to 5540c. We regard this as a solid investment for private investors. At the current level the share is on a P:E of 9,87 which seems reasonable for a defensive share.
JSE:AIP
by PDSnetSA
$JSEAIP - Adcock Ingram: Worth A Deep Dive IntoAdcock released a very good set of interim results for the six months ended 31 December 2022 yesterday. Revenue +8% Gross profit +8% Trading profit +15% HEPS +20% Dividend +20% This is an overlooked stock but one good set of results certainly does not mean buy so I guess a deep dive is necessary on this one. The technical picture is also a good looking one. From the January 2016 low at 3544 to the 2018 peak at 7200, the stock advanced in five waves. The selloff to 3700 unfolded in three waves and most importantly, held above 3544. The advance from the 3700 low has been choppy but in the short-term looks to still have upside potential to around 6200.
JSE:AIPLong
by Loyiso_BlaqueSoros_Mpeta
1
Adcock showing strong upside to R57.61 but with warningInv Head and Shoulders formed on Adcock and now the price is above the neckline showing upside to come. 7>21>200 RSI>50 Bullish CONCERNS: This is a very volatile, flimsy and illiquid stock compared to the Blue Chips. I call these unhealthy charts which seldom work well with breakout patterns. Maybe as a Weekly analysis or Monthly will show some more promising price action, but daily is dangerous by just looking at it. Target R57.61 ABOUT Adcock Ingram is a South African pharmaceutical company that was founded in 1891 by Thomas Adcock and Joseph Ingram. It has a market capitalization of over R9 billion (Hence Medium Cap company that I don't like to trade). Adcock Ingram is one of the top pharmaceutical companies in South Africa, with a strong focus on the manufacturing, marketing, and distribution of healthcare products. They are also known for their insulin and penicillin. It has a ton of products, including over-the-counter medicines, prescription medicines, and medical devices. Some brands which I'm sure you know and helped you through Covid and your sick days are: Corenza: A popular brand of cold and flu medication in South Africa, known for its effervescent tablets. Linctagon: A range of cough and cold medications that includes lozenges, syrups, and capsules. Compral: A well-known brand of pain relievers, including tablets and capsules. Probiflora: A range of probiotic supplements designed to support digestive health. Bioplus: A popular energy supplement that is available in a variety of formulations, including capsules and effervescent tablets. Panado: A brand of pain relievers that is commonly used to treat headaches, fever, and other common ailments. Sominex: A sleep aid medication that is used to treat insomnia and other sleep disorders. Adcock Ingram has a strong presence in the African market, with operations in over 10 countries on the continent.
JSE:AIPLong
by Timonrosso
AIPAt a forward price-to-earnings ratio of 10.8 times, the share is moving higher from it's lowest valuation levels since coming to market. The last set of results were mixed with Prescription turnover increasing 0.7%, consumer turnover rising by 13.4% to R892m, Hospital turnover improving by 11.9% while gross margins decreased from 39.4% to 37.3%. Group Revenue increased by 4%, Operating Expenditure decreased by 2%, Headline Earnings increased by +1% and Headline Earnings Per Share at 417.5 cents. Growth: adversely impacted by the in the fourth quarter of the financial year, by the virtual absence of a cold and flu season in South Africa, resulting in very few orders for replenishment of the winter basket. While the group stated that it is in a strong financial position and that it generated strong cash flows in FY2020, no dividend was declared as the board decided to adopt a prudent approach and preserve cash until the full impact of COVID-19 is better understood. Reviewing the monthly share price chart, we note the price continuing to rebound off the monthly trend linie support extending back to the swing lows of October-2008 and March-2016. In addition, the daily chart also sees the price clearing it's 200-day moving average - a key technical development. The pivot/clearance level is a close above 4818c however aggressive traders could look to purchase at current levels using a stop-loss of 4170c. Upside Targets are 5228c, 5730c.
JSE:AIPLong
by LD_Perspectives
ADCOCK INGRAM HOLDINGS (AIP) SHORTThough it possible that we might see the prices move up towards the descending trendline, it is also probable that once prices break the 5 200 pyschological level, more sellers will enter this market. Prices are below the 200 exponential moving average on all major timeframes, signaling a bearish bias. The market could likely open with a gap down considering that they closed at such a price (5 200). Sell: When the price breaks below the 5 200 psychological level, or when the price rejects the descending trendline. This trade will be null and void if the price breaks above the descending trendline and continues to make a series of higher highs and higher lows.
JSE:AIPShort
by munyaelliott