UBS changes stance but holds price target
UBS on Wednesday moved Galenica's rating up to "neutral" from "sell" without altering its price target of CHF85. That target compares with the stock's trading level of CHF82.05, implying about 4% potential upside at the current price.
Context for the upgrade
The upgrade follows a share price decline of roughly 20% since late February. UBS noted that sell-side estimates remained largely unchanged through that period, while buy-side expectations "saw a reset." The broker also pointed to a one-year dividend yield of 3.1%, which it said is broadly in line with Galenica's historical average.
Operational and financial forecasts
UBS projects organic sales growth of about 2% over the 2025-2030 period, which is below Galenica's own target range of 3% to 5%. The bank expects EBIT margins to increase to 6.2% by 2030 from 5.6% in 2025.
On a revenue basis, UBS's model shows CHF4.35 billion in 2026, rising to CHF4.57 billion by 2030. UBS-adjusted diluted earnings per share are forecast at CHF3.92 in 2026 and CHF4.47 in 2028. In valuation terms, the stock is seen trading at 12.9 times 2026 EV/EBITDA, decreasing to 11.2 times by 2030 under UBS's assumptions.
Regulatory risk flagged
The broker highlighted a potential sales decline in 2029 tied to the anticipated liberalisation of over-the-counter drug shipment rules in Switzerland. UBS said this regulatory change could create headwinds for Galenica's outlook.
Valuation scenarios and DCF inputs
UBS outlined an upside scenario valuing Galenica at CHF107, which assumes group sales growth of 5.5% and EBIT margins of 8.5% over 2027-2030. The downside scenario produces a CHF60 valuation, based on sales growth of -2.0% and EBIT margins of 3.7%, yielding an upside-to-downside ratio of 1.1 to 1. The firm's discounted cash flow valuation uses a terminal sales growth rate of 2.5% and a weighted average cost of capital of 6.4%.
What this means for investors
UBS's upgrade reflects a reassessment of relative value after a significant share price pullback, while the unchanged CHF85 target indicates the broker's view that the stock remains only modestly undervalued versus current levels. The firm's forecasts and scenario analysis outline potential paths for revenue, margins, and earnings but also underscore an identifiable regulatory risk that could pressure sales in 2029.