GRFS - Grifols downgraded at Morgan Stanley citing slower margin recovery

Grifols, S.A. ( NASDAQ: GRFS ) traded lower Friday after Morgan Stanley downgraded the Spain-based operator of plasma collection centers, arguing that the company's FY22 results indicated a slower margin recovery.

During the recent earnings call, Alfredo Arroyo, Chief Financial Officer of Grifols ( GRFS ), said the company's standalone EBITDA margin estimated at ~20% for H1 could reach 23%, 25% in H2 2023.

Arroyo said that the improvement would be mainly due to the plasma cost decline started in Q4 2022 and cost reduction initiatives accelerated by an ongoing operational improvement plan. The company also expects 8% – 12% total revenue growth for the year on a constant currency basis.

However, Morgan Stanley analyst Thibault Boutherin who reaffirms a £14 per share target on GRFS, argues that the company's adj. EBITDA guidance stands 12% below the guidance.

And with Chairman Steve Mayer (who led the focus on execution) leaving Grifols ( GRFS ), "the market is now pricing in higher uncertainty on the shape of margin recovery and the path to deleveraging," Boutherin added.

Morgan Stanley upgraded Grifols ( GRFS ) to Overweight in December, citing a " strong growth year" in 2023.

Read why Seeking Alpha contributor Wolf Report issued a Buy rating on the stock in February.

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