Overview
AstraZeneca PLC (AZN) is a Cambridge, United Kingdom-headquartered international, science-led biopharmaceutical company. The group focuses on discovering, developing, manufacturing and commercialising prescription medicines and has operations all over the world with business in over 100 countries., with its medicines being consumed by millions of patients across the globe. Though the company selectively pursue therapies in autoimmunity, neuroscience and infection, it three focus areas: Oncology, Cardiovascular & Metabolic Disease (CVMD) and Respiratory.Its teams work alongside the world’s leading academic and biotech research institutions and have a clinical collaboration with Immunomedics. The company’s geographic segments are grouped as the UK, Continental Europe, the Americas, and Asia, Africa & Australasia.

Recent Development
Recently, the company announced detailed results from the Phase III POLO trial which showed encouraging results from its cancer drugs Lynparza and Imfinzi. Imfinzi was used for stage-three non-small cell lung cancer and Lynparza for pancreatic cancer, and the data suggested that the medicine was prolonging the lives of cancer patients. The company seeks to lead a global race to increase survival rates as its push into early-stage treatments for cancer is yielding results.

Key Financial Highlights (Q1 FY 2019, in $m)

(Source: Company Filings)

In the first quarter of the year, driven by the sustained performance of new medicines and Emerging Markets, the company reported product sales growth of 10% on the actual exchange rate basis to $5,465 million. Reflecting the growth in product sales, core gross profit increased by 7% (13% at CER) to $4,425m, while reported gross profit increased by 8% in the quarter (13% at CER) to $4,362 million. The core gross margin rose by two percentage points to 80.5%and reported gross margin rose by two percentage points (three at CER) to 79.3%. Reported operating profit grew by 58% in the year (68% at CER) to $1,097m, and core operating profit surged by 84% (96% at CER) to $1,650m. The core operating margin rose by 13 percentage points to 30.0%, while the reported operating margin grew by seven percentage points to 20.0%. The reported earnings per share were up by 75 per cent (AER basis) to $0.47 in Q1 FY2019. The Core EPS was $0.89 in Q1 FY2019 and surged by 85 per cent (AER basis).

Valuation Methodology
Method:  Price/Book Value Approach (NTM)


Share Price Commentary

Daily Chart as at June-03-19, after the market closed (Source: Thomson Reuters)
 
On 3^rd June 2019, after the market closed, AZN shares closed at GBX 5,944, up by 1.90 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 6,540.00/GBX 5,110.00. The company's stock beta was 0.86, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalization was around £77.97 billion, with a dividend yield of 3.69%.

Conclusion
Over the years, the company has created a niche for itself in devising approaches effective at earlier stages of cancer, after initially falling behind competitors in developing treatments for metastatic cancer. Along with this, other highly productive and sustainable pipeline continued to be delivered, which could enable it to offer potentially transformative cancer treatment that could benefit patients around the world and provide the group with a lucrative source of reliable revenue. In the latest results, the company had demonstrated strong operating-margin improvement, as its Core Operating Profit almost doubled over the year.

Based on the healthy prospects and supported by valuation done using the above method, we have given a "BUY" recommendation at the closing price of GBX 5,944 (as on 3^rd June 2019) based on 7.13x NTM Price/Book Value (approx.) on FY19E book value per share (approx.).
 
*All forecasted figures and peer have been taken from Thomson Reuters.

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