GlaxoSmithKline PLC (LSE:GSK) is undervalued as it moves towards a demerger of subsidiary Haleon, according to Berenberg.
The broker believes the pharmaceutical group will come back into investors’ sights as the demerger begins to receive more attention.
Berenberg said the resultant devaluation gap, represented by a 14% upside to a price target of US$17 could close before the demerger, could close sooner dependent on positive data from GSK’s Respiratory Syncitial Virus (RSV) vaccine trials.
“Our research leads us to conclude GlaxoSmithKline is well positioned to succeed; RSV vaccine success would result in the return on R&D investment (RORI) meeting the cost of capital (8%),” Berenberg said in a note.
GSK is currently trading with a price to earnings ratio of 11.8x, relative to the EU sector average of 15.6x, with Berenberg’s upside reflective of a bridging of that gap.