Berenberg starts Dechra at ‘hold’, highlights ‘plenty of pet-ential’

The pandemic has driven pet ownership levels to historic highs globally, which, combined with already favourable trends in the companion animal products (CAP) market (75% of revenues for Dechra), has been supporting demand for pet-related products and services, Berenberg said.

However, in the near term, the bank expects some slowing in the market after two years of highly elevated growth and said it would wait to see how the market normalises before taking a more positive view on Dechra.

"We spoke with industry executives from all sides of the animal health market, from veterinary practice operators, competitors, distributors and former Dechra executives to get a 360-degree view of the industry," it said. "Overall, we came away with a positive view of the medium-term industry outlook and Dechra’s positioning."

Berenberg noted that the company’s margins have been on a generally upward trend in recent years, rising from 20.7% in FY 2013 to 25.6% in FY 2022. However, in the near term, margins will be affected by elevated R&D spend following the company’s acquisition of Piedmont, it said.

"This should support margin expansion in the medium term as new novel products are launched from Piedmont’s pipeline, but is a near-term headwind."