EQUITY RESEARCH: BAYER AG

The present Equity Research Report about Bayer AG Pharmaceuticals follows the guidelines and regulations of Lisbon School of Economics and Management (ISEG) Master Final Work and, in addiction, was written in line with the guidelines of the research report format recommended by CFA Institute, reflecting public information published by the company in its Annual and Quarterly Reports until 30th June 2021. Bayer AG is a German multinational Pharmaceutical and Life Sciences company, that is committed to the principles of sustainable growth, with a 2020FY Revenue estimated in €41 400 million. The selection of this company and the Pharmaceutical Industry was an easy choice for me. I always felt curious about this industry and the impact that it could have in people’s life. Moreover, with the current situation that we are living, with the Covid-19 Pandemic, this industry is a trend topic nowadays. Bayer has a BUY recommendation with Medium Risk, based on a forecast period of 6 years (2021E-2026F), with a 2022YE Price Target of €63.39/share, using the Discounted Cash Flow Method (DCF), meaning a 18.75% Upside Potential when compared with €53.38/share at 2021, June 30th. Other valuation methods to achieve Bayer’s Target Price includes the Dividend Discount Model (DDM), the Adjusted Present Value (APV), the Flow to Equity Method through Free Cash Flow to the Firm (FCFF) and a Relative Valuation using Peers’ Multiples. This report also includes a Monte Carlo Simulation, performed with Crystal Ball software and a Sensitivity Analysis, in order to understand what are the risks that could affect Bayer’s Price Target Recommendation. These risks include Litigation Issues, Supply Disruptions and Risks linked to the Agricultural Industry.