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Equity Story

  • Gerresheimer’s business model is characterized by a defensible and highly visible earnings profile, where barriers to entry are high (mainly capex investments) and cyclicality is low due to more than 80% of revenues depending on resilient pharmaceutical demand.

  • On top, the competitive landscape shows some degree of consolidation with a few large players dominating the market. Here Gerresheimer is banking on its core competitive advantages such as strong process and product know-how (i.e. large R&D budget), track record (perceived lower risk of product failure) and global footprint (catering into an industry that looks for global partners, rather than local heroes). This is evidenced in Gerresheimer holding strong #1-3 market positions in all its sub niches covered.

  • Besides GDP related growth, Gerresheimer benefits from structural growth drivers such as aging population as well as the trend towards self medication, leading to superior CAGR sales of 4-6% p.a. High operating and financial leverage should even lead to disproportionate bottom-line growth, and hence sustainably high returns (ROCE).

SWOT Analysis

Strengths

  • Leading position in key product categories

  • Structural underlying volume demand for pharma packaging

  • High barriers to entry: Validation and capex requirements

  • Diversified client base

Weaknesses

  • Limited pricing power

  • No IP protection, most products offer little scope for differentiation

  • Asset-intense business model, high capex requirements

  • Client base faces pressure 

Opportunities

  • Sensile has the potential to accelerate the group's growth profile

  • Build up of market position in plastics in the US

  • Bolt-on acquisitions

  • Emerging demand from generic and biotech manufacturers

Threats

  • Pricing pressure

  • Centor dependent on few key clients

  • Some cyclicality in e.g. cosmetics demand

  • Operational disruption can have meaningful impact on earnings

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