Haleon Shares Can Re-Rate Due to ‘Class-Leading Growth’

Haleon (LON: HLN) shares have been ranging for some time now, despite the just over 3% increase in the year-to-date. However, one bank believes the shares can re-rate.

HSBC stated in a note last week that the consumer health care company spun out of GSK, has “the strongest consumer health portfolio” and is building a “track record of superior execution.”

The bank initiated coverage of Haleon with a Buy rating and 370p per share price target, highlighting what it describes as the company's “class-leading growth.” It believes that growth can be sustained.

HSBC wrote, “We view Haleon as possessing an advantaged portfolio with strong positions across its main product segments and geographies.” 

The bank's analysts are impressed by Haleon's performance, which they believe will drive “consistent mid-single digit organic sales growth” alongside margin expansion.

The report highlights several factors that give HSBC confidence in Haleon's future. They see the company's oral care business continuing to deliver strong sales growth, with opportunities to improve penetration in key areas like sensitivity and gum health. Beyond core products, the analysts are impressed by Haleon's “interesting strides in new therapeutic areas,” such as its recent licensing deal for a new treatment.

HSBC also believes that Haleon can expand its margins through a new productivity program and volume growth. The analysts acknowledge the potential headwind of future stock sales by Pfizer, which still holds a significant stake in Haleon, but downplay the impact based on the muted market reaction to a recent sale.

“Given the prospect of consistent c5% organic sales growth alongside steady margin expansion and further de-gearing, we think that Haleon can earn a meaningful premium to the wider European Consumer Staples sector over time,” concluded the bank.