14 December 2005 11:03 [Source: ICIS news]
LONDON (ICIS news)--Deutsche Bank raised its share price target for Bayer to Euro40 from Euro32 on Wednesday on the back of restructuring and a strong outlook for life sciences growth.
“The creation of ‘new Bayer’ has been underpinned by significant cultural and management change,” bank analyst Tim Jones said in a note to customers. “Increased divisional management responsibilities, a stronger emphasis on variable remuneration and an increased commitment to achieve targets (not just set them) are evident.”
Jones added that while Bayer may remain a conglomerate, its recent portfolio change had created a company which derives 60% of its sales from life sciences.
“With improved growth prospects from these businesses (not least due to a robust drug pipeline,) the prospects for sustainable growth have improved – this is something that has been problematic for the company to deliver in the past few years and critical to restoring credibility,” Jones said.
It added that strong product positioning and robust supply and demand trends in its MaterialScience division should also continue to support the current strength of earnings.
Risks to Bayer include weaker than expected gross domestic product (GDP) growth, large dilutive acquisitions or the failure of any key products within the pharmaceutical pipeline, Jones said.
The bank added that its top picks in chemicals were, in addition to Bayer, Syngenta, BASF and Linde, which are all buy rated.
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