Grifols: Slightly Raising Our Valuation Following the Announced Sale of Stake in Shanghai RAAS

We're raising our fair value estimate for Class B (nonvoting) shares of narrow-moat Grifols to EUR 12.20/$13.40 from EUR 11.10/$12.20 after accounting for the planned sale of a 20% stake in China-based plasma firm Shanghai RAAS. The $1.8 billion in proceeds from the deal, which is expected to close in the first half of 2024, should help Grifols continue to pay down debt and improve its financial health. We look favorably on the deal, which allows Grifols to maintain its collaboration with Shanghai RAAS, giving it access to the world’s largest market for albumin through at least 2034. Grifols is also maintaining a more than 6% stake in Shanghai RAAS, giving it additional exposure to continued expected growth of the China plasma therapeutics market. The proceeds from the sale should provide a much-needed cash infusion in 2024, as Grifols has been balancing a heavy debt load during a time of lower profitability, as the firm recovers from lower plasma supply and less efficient operations during the pandemic.