An analyst covering Grifols SA, the Spanish blood plasma company plunged into chaos after a recent short-seller report, has broken ranks with peers defending their positive ratings on the stock.
Oddo BHF’s Juan Ros-Padilla acknowledged that while the Jan. 9 report by Gotham City Research LLC, was lacking in new information, it had put the spotlight on Grifols’ “unorthodox way of conducting M&A.”
“Us analysts were somewhat forgiving with this, given its (apparently) undemanding valuation, its purpose of amendment (new CEO, efficiency plan, asset disposals…) and the earnings momentum,” Ros-Padilla told clients in a report published Wednesday.
Ros-Padilla, who last week suspended his outperform rating on Grifols, said he was resuming coverage at underperform, while halving his price target to €9. The stock currently trades at about €8.6, having lost close to 40% of its value since the short-seller report criticizing the company’s accounting and corporate governance. It slid as much as 4% on Wednesday, following Ros-Padilla’s note.
“The market has shown to be far less merciful and the damage, in our view, will take some time to repair,” the analyst wrote.
Grifols has denied any wrongdoing.
Oddo is the first broker to change its bullish stance on Grifols, which still has 18 buy recommendations, according to data compiled by Bloomberg.
Many analysts have reiterated their positive calls, including Bestinver Securities’ Patricia Cifuentes, Alvaro Lenze at Alantra Equities and Banco Santander SA’s Jaime Escribano.
Oddo’s Ros-Padilla, meanwhile, sees more trouble ahead. Yields on Grifols’ bonds remain high, despite management’s reassurances, he noted, adding that the market is discounting a sustained increase in the cost of debt, alongside a dilutive capital increase or asset sales.
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