Company analysis and valuation of pfizer inc , novartis ag, sanofi and glaxosmithkline

Dissertation submitted in partial fulfillment of the Requirement for the MSc in Finance FINANCE DISSERTATION ON COMPANY ANALYSIS AND VALUATION OF PFIZER INC., NOVARTIS AG, SANOFI AND GLAXOSMITHKLINE TRINH HUONG GIANG ID No: 19046131 Intake Supervisor: Dr Nguyen Thi Hoai Thu September 2020 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126056581000000 TABLE OF CONTENTS CHAPTER INTRODUCTION 1.1 Overview 1.2 Area of the study 1.3 Study objectives 1.4 Methods of the study 1.5 Organization of the study CHAPTER MACROECONOMICS ANALYSIS 2.1 World economic outlook for 2021 2.1.1 Political Future 2.1.2 Economic Future 2.1.3 Socio-Culture Environment 2.1.4 Technology 2.2 The US economy 2.2.1 GDP analysis 2.2.2 Industrial production index 11 2.2.3 Inflation rate 12 2.2.4 Interest rate 13 2.2.5 Exchange rate 14 2.3 European economy 14 2.3.1 GDP analysis 14 2.3.2 Industrial Production index 15 2.3.3 Inflation rate 16 2.3.4 Interest rate 17 2.3.5 Exchange rate 17 CHAPTER INDUSTRY ANALYSIS 18 3.1 Rivalry among existing firms 18 3.2 Threat of substitute products 19 3.3 Threat of new entrants 21 3.4 Bargaining power of suppliers 21 3.5 Bargaining power of buyers 22 CHAPTER 4: COMPANY ANALYSIS 23 4.1 Pfizer Inc 23 4.1.1 Growth trend 23 4.1.2 Financial health 24 4.1.3 Investment ratio 28 4.1.4 Cash flow 29 4.1.6 Valuation 34 4.2 Novartis company 36 4.2.1 Growth trend 36 4.2.2 Financial health 37 4.2.3 Investment ratio 40 4.2.4 Cash flow 41 4.2.5 SWOT analysis 42 4.2.6 Valuation 44 4.3 Sanofi company 46 4.3.1 Growth trend 46 4.3.2 Financial health 47 4.3.3 Investment ratio 49 4.3.4 Cash flow 50 4.3.5 SWOT analysis 50 4.3.6 Valuation 53 4.4 GlaxoSmithKline company 55 4.4.1 Growth trend 55 4.4.2 Financial health 56 4.4.3 Investment ratio 58 4.4.4 Cash flow 59 4.4.5 SWOT analysis 60 4.4.6 Valuation 62 CHAPTER CONCLUSION 64 5.1 Conclusion and recommendations 64 5.2 Limitations 64 REFERENCES 66 APPENDIX I CASH FLOW RATIO OF PFIZER INC 70 APPENDIX II CASH FLOW RATIO OF NOVARTIS 71 APPENDIX III CASH FLOW RATIO OF SANOFI 72 APPENDIX IV CASH FLOW RATIO OF GLAXOSMITHKLINE 73 APPENDIX V FORECASTING INCOME STATEMENT & BALANCE SHEET & CASH FLOW STATEMENT OF PFIZER INC 74 APPENDIX VI FORECASTING INCOME STATEMENT & BALANCE SHEET & CASH FLOW STATEMENT OF NOVARTIS AG 78 APPENDIX VII FORECASTING INCOME STATEMENT & BALANCE SHEET & CASH FLOW STATEMENT OF SANOFI 82 APPENDIX VIII FORECASTING INCOME STATEMENT & BALANCE SHEET & CASH FLOW STATEMENT OF GLAXOSMITHKLINE 85 LIST OF TABLES Table No Page 2.1 Interest rate of the US from 2019 to 2020 13 2.2 Inflation rate in the European Union and the Euro area from 2015 to 16 2021 (compared to the previous year) 4.1 Financial ratios of Pfizer Inc (period from 2015 to 2019) 24 4.2 Financial investment ratio of Pfizer Inc ( period from 2015 to 2019) 28 4.3 Cash flow analysis of Pfizer Inc (period from 2015 to 2019) 29 4.4 Pfizer Inc’s SWOT analysis 31 4.5 DAE model of Pfizer Inc 35 4.6 Target price for Pfizer stock 35 4.7 Financial ratios of Novartis (period from 2015 to 2019) 37 4.8 Investment ratios of Novartis (period from 2015 to 2019) 40 4.9 Cash flow ratio of Novartis (period from 2015 to 2019) 41 4.10 Novartis SWOT analysis 42 4.11 DAE model of Novartis AG 45 4.12 Target price for Novartis stock 45 4.13 Financial ratios of Sanofi (period from 2015 to 2019) 47 4.14 Investment ratios of Sanofi (period from 2015 to 2019) 49 4.15 Cash flow ratio of Sanofi (period from 2015 to 2019) 50 4.16 Sanofi SWOT analysis 50 4.17 DAE model of Sanofi 54 4.18 Target price for Sanofi stock 54 4.19 GlaxoSmithKline financial health from 2015 – 2019 56 4.20 GlaxoSmithKline Investment ratio from 2015 - 2019 58 4.21 GlaxoSmithKline cash flow from 2015 - 2019 59 4.22 GlaxoSmithKline SWOT analysis 60 4.23 DAE model of GlaxoSmithKline PLC 63 4.24 Target price for GSK stock 63 4.25 Investment recommendation 64 LIST OF FIGURES Figure No Page 2.1 Real GDP growth (annualized % change) 10 2.2 True March 2020 unemployment rate could surpass great recession 11 levels 2.3 The United States industrial production index in 2020 12 2.4 Annual Inflation Rates of The US (from 2010 to 2020) 13 2.5 Europe GDP growth rates 14 2.6 Unemployment rate in EU ( %) 15 2.7 Industrial production index in the Euro Area in 2020 16 2.8 Euro area interest rate from 2000 to 2020 (%) 17 4.1 DCF model of Pfizer Inc 34 4.2 DCF model of Novartis AG 44 4.3 DCF model of Sanofi 53 4.4 DCF model of GlaxoSmithKline PLC 62 CHAPTER INTRODUCTION 1.1 Overview It is basic knowledge that a company operates its business at aim to make profits, create value for society and contribute to the development of the national economy Building effective business strategies will bring success to the company There are many aspects of business strategies that a company has to considered, both micro and macro aspects In addition, a company needs to have correct analysis and valuation about factors relating to the company In this hot time, when the translation of COVID -19 pandemic is constantly increasing in countries around the world, the analysis and evaluation of a company's business is more important and necessary than ever This study would like to choose four famous pharmaceutical companies of the world (Pfizer, Novartis AG, Sanofi and GlaxoSmithKline) to analyze and valuate their business operations In the break time of Covid 19-pandemic, pharmaceutical and medical industry is considered as the industry determining the existence of the world Pfizer, Novartis AG, Sanofi and GlaxoSmithKline are globally famous in studying and producing kinds of medicines and vaccines All these companies have big contribution to the development of medicine and pharmaceutical industry In this time, it is very interesting and useful to analyze the business operations of these four pharmaceutical companies That is the reason for the choice of the title thesis “Company analysis and valuation of Pfizer, Novartis AG, Sanofi and GlaxoSmithKline” The content of this research will give overview of the world economy in current time and outlook for year 2021 The overview of the US and European economies will also be analyzed in the research However, the author will mainly focus on the analysis and valuation of the companies in terms of business description, SWOT analysis, ratio analysis and forecasted financials, and valuation models 1.2 Area of the study The research is studied in four pharmaceutical companies (Pfizer, Novartis AG, Sanofi and GlaxoSmithKline) which are located in America, Switzerland, and England respectively These are four multinational companies However, the author will concentrate on their business operations in the US and European markets which are related to main contents including business description, SWOT analysis, ratio analysis, forecasted financials and valuation models 1.3 Study objectives This study is conducted at aim to analyze and valuate the business operations of four pharmaceutical companies, including Pfizer, Novartis AG, Sanofi and GlaxoSmithKline There are four objectives in this study They are: - To describe business operations of the companies - To find out Macroeconomic analysis - To find out industry analysis - To find out company analysis - To evaluate the business of four companies 1.4 Methods of the study The author will use secondary research to study company analysis and valuation of these four companies, Pfizer; Novartis AG; Sanofi; and GlaxoSmithKline The method of selecting the study area is employed in the research In the process of analyzing data, the author will use statistical method, analytical, and comparative method to evaluate the results and determine the trend of fluctuations of analytical indicators in both absolute and relative numbers Comparative method is also used to compare business operations among four companies, to know which one has higher ratios, which one has lower, which one operates best, and which one operates worst Data information is collected from different sources such as IMF (International monetary funds), income statement, and balance sheets cash flow statement of four companies Moreover, data source is also from four companies’ websites, articles, journals, etc 1.5 Organization of the study This study includes eight chapters as follows: - Chapter 1: It is introduction part which describes overview, area of the study, objectives, methods of the study - Chapter 2: It is macroeconomics analysis which concentrates world economic outlook, US economy and European economy - Chapter 3: It is industry analysis which concentrates on five force framework - Chapter 4: It is company analysis which analyzes growth trend, financial health, investment ratio, cash flow, SWOT analysis, and valuation of four companies - Chapter 5: to conclude the content of the study, give recommendations, and describe limitations CHAPTER MACROECONOMICS ANALYSIS 2.1 World economic outlook for 2021 2.1.1 Political Future The world is going through a period of rapid, complex and unpredictable changes Big countries adjust strategies, both cooperate, compromise, compete, fight each other fiercely, gain positions and interests, causing a complicated situation in many regions and countries National conflict, religion, international terrorism, local war, economic war, cyber war, intervention activities, overthrow, civil disobedience, sovereignty dispute, territory, raw… took place under new, more severe forms Global issues and non-traditional security such as: food security, energy security, water security, financial security, cyber security, climate change, natural disasters, epidemics, etc serious developments Populism, great water power, and pragmatism have increased dramatically in international relations International law and global multilateral institutions face major challenges In recent years, EU area has to face with political instability, including challenges from the internal divergence of EP for the 2019-2024 term, challenges from Brexit's uncertain future, challenges from the disparity in development rates among EU member countries, challenges from the immigrant crisis, and challenges from the conflict between the policy of building the European Army and challenges from dealing with relations with the US, China, Russia and Turkey The results of the EP election (May 26, 2019) show that there is an internal division in the context that the EU is in need of unity more than ever The Brexit (UK leaving EU) issue by October 31, 2019 has caused deep divisions within London politics, causing Prime Minister Teresa to resign This is also a big challenge for the EU, which can cause chaos in UK-EU relations In the context of the UK's departure from the EU, which is causing controversy and confusion in Europe, has not been resolved, the policy of developing member states of this alliance at various speeds to deal with the current stagnation as well as the consequences from Brexit that had been supported by some leading countries in the EU such as Germany and France, are also heating the continental politics The policy of rapid European development has been opposed by Eastern European countries who have just joined the EU because