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Fundamental View
AS OF 05 Jun 2025Stryker benefits from a leading position in orthopedics as well as strong franchises in medical surgery and neurotechnology. The company’s sales and EBITDA growth trajectory bests most of its medical device peers.
Stryker has exhibited discipline with capital allocation. Following larger bolt-on deals in 2022 (Vocera, $3.1 bn) and 2020 (Wright Medical, $5.4 bn) management prioritized debt reduction.
We expect SYK to manage leverage in the low- to mid-2x range as it addresses its M&A needs/wants in the aftermath of the Inari purchase.
Business Description
AS OF 05 Jun 2025- Stryker (SYK) is a global manufacturer of implants used in joint replacement & trauma surgeries; surgical equipment & surgical navigation systems; endoscopic & communications systems; patient handling & emergency medical equipment; neurosurgical, neurovascular & spinal devices among other products. Stryker generated $22.6 bn of revenues in 2024 (versus $20.5 bn in 2023).
- SYK maintains two operating segments: MedSurg & Neurotechnology (60% of 2024 consolidated revenues) and Orthopaedics & Spine (40%).
- SYK's recent sizable acquisitions include: Inari Medical ($4.9 bn) in 2025, which increased its exposure to peripheral vascular diseases; Vocera ($3.1 bn enterprise value) in 2022, which increased its digital care coordination and communication categories; Wright Medical ($5.6 bn including debt) in 2020, which increased its exposure to the trauma & extremities end market; and K2M Group ($1.4 bn) in 2018, which boosted the spine portfolio.
Risk & Catalysts
AS OF 05 Jun 2025Stryker is exposed to medical procedure volumes. While volumes have been positive, owing in part to the resumption of procedures deferred during COVID, volatility could result from economic uncertainty in the year ahead.
Stryker’s M&A interest has leaned bolt-on in nature over the past several years, including the acquisitions of Inari in 2025 ($4.9 bn), Vocera in 2022 ($3.1 bn) and Wright Medical in late 2020 ($5.4 bn).
Stryker has moderate overall exposure to hospital capital budgets versus medical device peers as it has recurring sales of consumables and parts.
Last quarter SYK announced a definitive agreement to sell its US Spinal Implants business to Viscogliosi Brothers to create a newly formed company (to be named VB Spine, LLC).
Key Metric
AS OF 05 Jun 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Revenue | 17,108 | 18,449 | 20,498 | 22,595 | 23,218 |
| Gross Profit | 10,968 | 11,578 | 13,058 | 14,440 | 14,851 |
| R&D | (1,235) | (1,454) | (1,388) | (1,466) | (1,503) |
| SG&A | (6,427) | (6,455) | (7,121) | (7,703) | (8,166) |
| Adj. EBITDA | 4,753 | 4,755 | 5,356 | 6,179 | 6,384 |
| Total Debt | 12,479 | 13,048 | 12,995 | 13,597 | 16,781 |
| Gross Leverage | 2.6x | 2.7x | 2.4x | 2.2x | 2.6x |
| Interest Coverage | 14.1x | 14.1x | 15.0x | 15.6x | 16.1x |
CreditSight View Comment
AS OF 19 May 2025We maintain our Outperform recommendation on Stryker. SYK exhibits solid organic growth prospects on the strength of its orthopedics business and its capital equipment backlog. While M&A activity is likely to increase through the remainder of the year, we expect management’s focus to lean bolt-on. We prefer SYK to similarly-rated peer, BSX, a name with similar leverage and (perhaps) a richer M&A appetite.
Recommendation Reviewed: May 19, 2025
Recommendation Changed: May 03, 2022
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 05 Jun 2025We expect the credit profile of Sinopec, which is one of the three Chinese national oil companies (NOCs) to continue to be underpinned by its strategic role in China’s energy security and the resulting strong government support.
We expect Sinopec’s standalone credit profile to remain supported in FY24 by resilient refined oil demand and improving demand for chemical products as industrial activities pick up and the destocking trend ends.
To note, we use the financials of HKEx listed Sinopec Corp (386.HK) as a proxy for the credit profile of its parent, the obligor of the outstanding $ bonds (BBG: SINOPE).
Business Description
AS OF 05 Jun 2025- Sinopec Group is a Chinese integrated oil and gas (O&G) company and is one of the largest globally & domestically. In 3Q24, 56.4% of Sinopec Corp' external revenues came from marketing and distribution (i.e. retail and direct sales of refined oil), 13.9% from chemicals, 5.1% from refining, and 5.0% from E&P. Corporate and others segment accounted for the remaining 19.6% of sales revenue, consisting of import and export business, R&D and managerial activities.
- The refining segment purchases crude oil from third parties as well as the E&P segment of the company, and processes crude oil into refined petroleum product. Most of the gasoline, diesel and kerosene are sold internally to the marketing and distribution segment of the company; part of the chemical feedstock is sold internally to the chemical segment, and the other refined petroleum products are sold externally to both domestic and overseas customers. The marketing and distribution segment purchases refined oil products from the refining segment and third parties, and mainly distributes to domestic customers via its wholesale and retail networks.
- In 9M24, Sinopec's total oil and gas output was 386.06 mn barrels of oil equivalent, up 2.6% YoY; this included 190.42/20.87 mmbbls (+1.2%/-6.6%) of domestically produced/overseas crude oil, as well as 1,084 bcf of natural gas (+5.6% YoY). The average realized price of its crude oil and natural gas was $76.6/bbl (+1.1% YoY)and $7.48/thousand cubit feet (+5.4% YoY)respectively.
Risk & Catalysts
AS OF 05 Jun 2025Risks: Lower-than-expected domestic sales of refined oil and chemical products due to a severe economic downturn, higher-than-expected crude oil and gas feedstock costs resulted from geopolitical tensions, elevated inventory losses due to tumbling oil & gas prices, and large capex overrun result in a weaker standalone credit profile. However, we expect the strong government support to offset these downside risks. US sanction related headline risks due to US-China tension and other geopolitical risks.
Catalysts: inflow into China $ bonds as a result of improving China macro outlook and US-China relationship; stronger-than-expected recovery in chemical product demand.
Key Metric
AS OF 05 Jun 2025| RMB bn | FY20 | FY21 | FY22 | FY23 | 3Q24 |
|---|---|---|---|---|---|
| Total Debt/Capitalization | 25.3% | 25.6% | 27.5% | 31.5% | 33.1% |
| Net Debt/Capitalization | 9.4% | 7.6% | 16.3% | 19.8% | 21.4% |
| Total Debt/Total Equity | 33.8% | 34.5% | 38.0% | 46.1% | 49.4% |
| Total Debt/Total Assets | 17.2% | 16.7% | 18.3% | 21.7% | 22.9% |
| Total Debt/EBITDA | 1.5x | 1.2x | 1.5x | 2.0x | 2.3x |
| Net Debt/EBITDA | 0.6x | 0.4x | 0.9x | 1.3x | 1.5x |
| EBITDA/Gross Interest | 16.8x | 20.1x | 16.1x | 14.5x | 14.2x |
| EBITDA Margin | 9.5% | 9.4% | 7.0% | 6.8% | 5.9% |
CreditSight View Comment
AS OF 05 Jun 2025We affirm our Market perform recommendation on Sinopec. A-rated Chinese state-owned enterprises (SOEs), including Sinopec are trading tight due to a lack of new supply and as investors fly to quality amid macro uncertainties in China. We continue to prefer AA-rated Korean quasi-sovereign names for safe carry (like KOROIL, KORGAS, KEPCO) and higher-beta Chinese SOEs for spread pickup.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: May 03, 2021
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 03 Jun 2025AstraZeneca enjoys one of the strongest growth profiles in our coverage universe, reflecting an impressive portfolio of innovative medicines, particularly in Oncology. The addition of Alexion supports AZN’s growth prospects, bringing strong assets in immune-mediated rare diseases.
AZN also enjoys relatively strong diversification, with core sales coming from multiple therapeutic areas and with depth across its Oncology and Biopharma platforms.
AZN’s capital allocation priorities include investment in the business, the pursuit of value-enhancing M&A, and support for the dividend.
Business Description
AS OF 04 Jun 2025- AstraZeneca is a UK-based pharmaceutical company that researches, develops, and manufactures drugs with a focus in (i) Oncology, (ii) Cardiovascular, Renal and Metabolism (CVRM), (iii) Respiratory and Immunology, (iv) Rare Disease, and (v) Vaccines and Immune.
- AstraZeneca operates in five primary segments: Oncology, CVRM (cardiovascular, renal, and metabolism), Respiratory and Immunology, Rare Diseases, and V&I (Vaccines and Immune). AstraZeneca reported FY24 revenues of $54.1 bn, with ~41% from Oncology, ~23% from CVRM, ~15% from Respiratory and Immunology, ~16% from Rare Diseases, and ~3% from Vaccines and Immune.
- In recent years, AstraZeneca has acquired Alexion for ~$39 bn, CinCor for ~$1.8 bn, Fusion for ~$2 bn, Neogene for $320 mn, TeneoTwo for ~$100 mn with future contingent milestone payments of up to $1.1 bn, Gracell for ~$1 bn, Icosavax for ~$800 mn and Amolyt for $800 mn.
Risk & Catalysts
AS OF 03 Jun 2025Given that AZN’s leverage has been largely restored to pre-Alexion levels, we expect limited deliberate improvement from here. However, we expect future shareholder rewards and business development to be managed somewhat conservatively.
AstraZeneca has shown discipline with respect to leverage and capital allocation in recent years. While AstraZeneca pays a relatively aggressive dividend (~32% of LTM FCF), the company has historically been very conservative with share repurchases and has even used share issuance to fund certain acquisitions.
AZN recently lost a patent-infringement lawsuit against Samsung Biologics regarding a biosimilar version of Soliris.
Key Metric
AS OF 03 Jun 2025| $ mn | Y20 | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|---|
| Revenue | 26,617 | 37,417 | 44,351 | 45,811 | 54,073 | 54,982 |
| Gross Profit | 21,318 | 24,980 | 31,960 | 37,543 | 43,866 | 44,752 |
| R&D | (5,991) | (9,736) | (9,762) | (10,935) | (13,583) | (13,959) |
| SG&A | (11,294) | (15,234) | (18,419) | (19,216) | (19,977) | (19,974) |
| Adj. EBITDA | 8,680 | 11,506 | 14,507 | 15,641 | 18,208 | 18,700 |
| Total Debt | 19,699 | 29,794 | 28,279 | 27,494 | 28,843 | 30,095 |
| Gross Leverage | 2.3x | 2.6x | 1.9x | 1.8x | 1.6x | 1.6x |
| Interest Coverage | 11.8x | 16.0x | 17.1x | 14.5x | 13.9x | 13.4x |
CreditSight View Comment
AS OF 27 May 2025We reiterate our Outperform recommendation on AstraZeneca. We would take the spread pickup (~15 bp) offered versus MRK at the belly of the curve. While we acknowledge MRK carries lower net leverage (~0.8x as of 1Q25), the company also has a weaker operating story and faces significantly higher product concentration risks.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: April 01, 2021
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
How may we help you?
Search topics about wealth insights and investments.SK Hynix Inc.
- Bond: HYUELE 5.5 29
- Indicative Yield-to-Maturity (YTM): 4.610%
- Credit Rating : Baa2/BBB/BBB
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Fundamental View
AS OF 04 Jun 2025Business Description
AS OF 04 Jun 2025- SK Hynix is one of the world’s largest memory semiconductor companies. As an Integrated Device Manufacturer (IDM), it engages in the design, manufacturing and sale of advanced memory semiconductors. It derives 80% of 1Q25 revenues from the sale of DRAM (dynamic random-access memory), 18% from NAND Flash, and the remaining 2% from CMOS Image Sensors and foundry services. The company's products are essential to a wide range of electronic devices, including PCs, servers, graphic cards, and mobile devices.
- SK Hynix holds the largest global market share (1Q25: 36%) in DRAM and second largest in NAND Flash (4Q24: 20.5%).
- SK Hynix is a member of SK Group, South Korea's second largest conglomerate by asset, and is 20.1%-owned by SK Square.
- The company has manufacturing facilities located in (1) South Korea — Icheon (DRAM, NAND), and Cheongju (NAND); and (2) China — Wuxi (DRAM), Dalian (NAND); and packaging & testing facilities in Chongqing, China.
- SK Hynix had a market capitalization of KRW 158.3 tn as of 4 June 2025.
Risk & Catalysts
AS OF 04 Jun 2025- The memory sector is subjected to significant boom/bust cycles, leading to volatility in its revenue and EBITDA margin. During an upcycle, memory vendors typically expand capacity to meet strong end-demand from PC, smartphones, and servers; however, the long-lead time for new plants could result in an oversupply when end-demand is tapering off.
- Capex intensity (as % of revenues) and R&D costs are elevated even in downcycles for SK Hynix, as it needs to maintain technological leadership and fast evolving product requirements from customers.
- SK Hynix has large production and revenue exposure to China; rising US-China tension and restrictive US chip exports to China could destabilize the long-term prospect of its China production and weigh on its $ bonds. Though, in Oct-23 SK Hynix was designated as a “Validated End User” by the US government, which gave it an indefinite waiver for importing US chip gears to their Chinese plants.
- SK Hynix may be vulnerable to US tariff risk; the company derived 73% of 1Q25 revenues from the US.
Key Metric
AS OF 04 Jun 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 23.5% | 28.1% | 37.8% | 25.6% | 24.2% |
| Net Debt to Book Cap | 13.3% | 21.2% | 27.7% | 11.6% | 11.1% |
| Debt/Total Equity | 30.8% | 39.2% | 60.7% | 34.4% | 31.9% |
| Debt/Total Assets | 19.9% | 23.9% | 32.4% | 21.2% | 21.0% |
| Gross Leverage | 0.8x | 1.2x | 5.8x | 0.7x | 0.6x |
| Net Leverage | 0.5x | 0.9x | 4.3x | 0.3x | 0.3x |
| Interest Coverage | 87.3x | 38.7x | 3.8x | 26.5x | 33.7x |
| EBITDA Margin | 52.8% | 46.2% | 17.1% | 53.8% | 56.6% |
CreditSight View Comment
AS OF 24 Apr 2025Considering SK Hynix’s strong position in the growing semiconductor industry and the HYUELE 5.5 29 bond’s potentially attractive yield-to-maturity for its January 2029 maturity, coupled with investment-grade ratings, it could be a worthwhile purchase now for investors seeking stable income from a major technology player, assuming SK Hynix maintains its financial health.
Recommendation Reviewed: April 24, 2025
Recommendation Changed: February 20, 2025
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 04 Jun 2025IBK benefits from a legally binding solvency guarantee from the Korean government and is viewed as a Korean quasi-sovereign issuer. The bank is listed, but remains majority state-owned. Previous governments had proposed privatizing it, but subsequent governments scrapped these plans. The government intends to keep its stake above 50%, and wants IBK to focus on lending to SMEs and provide earlier stage investment capital.
IBK manages the difficult feat of combining its policy role to support Korean SMEs with performance that compares creditably with Korean commercial banks.
Business Description
AS OF 04 Jun 2025- IBK was established under its own Act in 1961 to assist the development of Korea's small business sector. It claims a 24% market share in SME lending.
- It was listed in the early 1990s, but was re-nationalised following heavy losses in the Asian economic crisis of the late 1990s. It was re-listed in 2003, and is majority owned by the government which holds 59.5%; the National Pension Scheme holds 5.6%, and other policy banks have small stakes (7.2% by Korea Development Bank and 1.8% by the Export-Import Bank of Korea).
- Under Article 43 of the IBK Act, if the bank incurs losses they should be set against its reserves and "if the reserves are not sufficient the Government shall assume the remaining loss". Although this is a solvency guarantee and not an explicit guarantee for the timely payment of debts, we believe the Korean government will ensure IBK is in a position to make such timely payments.
Risk & Catalysts
AS OF 04 Jun 2025The bank’s ratings are closely tied to the Korean sovereign’s ratings due to its quasi-sovereign status.
Its ratings and its default risk should therefore not be impacted by any deterioration in its financials, provided the government continues to inject new capital when needed, which it is expected to.
Its policy mandate requires it to use at least 70% of its funding for SMEs. Risks are mitigated by its granular SME exposures which are more than 80% secured, including guarantee from state-owned credit guarantee agencies. Korean governments have also always been quick to provide support including capital injections to IBK when needed, with the most recent injection of KRW 1.3 tn during the COVID.
Key Metric
AS OF 04 Jun 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Operating Profit / Average Assets | 1.30% | 1.49% | 1.59% | 1.39% | 1.33% |
| ROAA | 0.6% | 0.6% | 0.6% | 0.6% | 0.7% |
| ROAE | 9.2% | 9.5% | 8.8% | 8.1% | 9.6% |
| Provisions/Average Loans | 0.34% | 0.50% | 0.67% | 0.52% | 0.37% |
| Nonperforming Loans/Total Loans | 0.85% | 0.85% | 1.05% | 1.34% | 1.34% |
| CET1 Ratio | 11.3% | 11.1% | 11.3% | 11.3% | 11.4% |
| Total Equity/Total Assets | 6.92% | 6.79% | 7.10% | 7.25% | 7.10% |
| NIM | 1.51% | 1.78% | 1.79% | 1.70% | 1.63% |
CreditSight View Comment
AS OF 16 Jun 2025IBK is not wholly government owned – 59.5% direct government ownership, 7.2% KDB and 1.8% KEXIM – but is a policy bank benefiting from a Korean government solvency guarantee. For a policy bank it also has a fairly good track record and manages the difficult feat of combining its policy role to support Korean SMEs with performance that compares creditably with Korean commercial banks. As the leading lender to Korea’s medium and small businesses, IBK plays a key role in the country’s economy, enhanced by the longstanding objective of numerous administrations to achieve a more diversified economy less reliant on the “chaebol”. Successive Korean governments have always been quick to provide support including capital injections to the policy banks when needed.
Recommendation Reviewed: June 16, 2025
Recommendation Changed: March 17, 2017
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 29 May 2025PLN enjoys extremely strong ties with the Government of Indonesia (GoI) given its critical policy role of electrifying the nation. Post the launch of Indonesia’s sovereign wealth fund Danantara, PLN is now indirectly owned by the GoI through Danantara.
PLN delivered a robust set of FY24 results, with total revenue and EBITDA up 7% and 18% YoY respectively driven by resilient power demand across Indonesia
Looking ahead, we expect PLN’s credit metrics to improve in FY25 supported by higher YoY EBITDA, though partially weighed upon by higher capex; we anticipate FY25 EBITDA growth to be in the mid to high single-digit % YoY, mainly attributable to Indonesia’s healthy economic growth, supporting power demand; we also expect power tariffs to remain flat.
Business Description
AS OF 29 May 2025- PLN is involved in the entire electricity value-chain, from power generation, to transmission, distribution and retail.
- It alone accounts for 76% (~47 GW) of Indonesia's generation capacity (of which 8 GW is renewable capacity), while IPPs provide the remainder.
- The company controls and operates the entire transmission and distribution network in the country. It is the sole buyer of electricity produced by IPPs, through power purchase agreements (PPAs).
- It sells electricity to well-diversified off-takers – 41% to households, 25% to industrial customers, 21% to businesses and 12% to others.
- Since 2015, the GoI has gradually implemented monthly tariff adjustments for 13 customer groups, so that rates charged to customers are better matched with production costs.
- However, under the Public Service Obligation (PSO), the company will continue to sell electricity at subsidized rates of 50% to 450-volt amperes (VA) power households and 25% to 900 VA power households. The GoI subsequently reimburses the company for the difference between the subsidized tariff rate and production cost, typically within 2-3 months.
Risk & Catalysts
AS OF 29 May 2025The company provides subsidized electricity to certain households for which it subsequently receives reimbursements from the GoI; though these payments tend to get delayed during major events such as COVID-19 pandemic.
In order to increase the country’s electrification ratio to 97%, the company had been mandated by the GoI to develop large electricity capacities through the Fast Track II and 35,000 MW Programs. Implementation of such complex programs has required significant capital expenditure, which has led PLN’s FCF to fall deep into the red in recent years and created a funding gap.
The success of the above programs is also contingent on the company’s ability to source coal cheaply, select quality contractors, acquire land rights and receive adequate subsidy reimbursements from the GoI.
Being primarily a thermal power producer, PLN may be viewed unfavourably from an ESG perspective.
Key Metric
AS OF 29 May 2025| IDR bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 32.2% | 29.7% | 28.9% | 27.8% | 27.3% |
| Net Debt to Book Cap | 28.2% | 26.9% | 25.2% | 23.7% | 23.0% |
| Debt/Total Equity | 47.4% | 42.2% | 40.7% | 38.5% | 37.5% |
| Debt/Total Assets | 28.1% | 25.7% | 24.6% | 23.4% | 22.5% |
| Gross Leverage | 5.5x | 5.0x | 4.2x | 4.3x | 3.7x |
| Net Leverage | 4.8x | 4.6x | 3.7x | 3.7x | 3.1x |
| Interest Coverage | 2.5x | 3.2x | 4.3x | 3.6x | 3.7x |
| EBITDA Margin | 29.0% | 28.0% | 30.1% | 26.4% | 29.1% |
CreditSight View Comment
AS OF 28 May 2025We have a M/P on PLN and prefer its 2042-2050s. While we think PLN’s shorter-dated is trading slightly tighter than our FV, we do not think the widening potential of its shorter dated is sufficient to warrant an Underperform. Overall, we remain comfortable with PLN’s resilient credit profile supported by healthy domestic power demand, good insulation from input cost volatility and strong state-ownership. While there were concerns of the GoI demonopolizing the power sector, we think PLN’s monopoly is likely to stay after President Prabowo reportedly abandoned plans to allow customers to purchase clean electricity directly from renewable energy developers. That said, we think PLN continue to face higher coal-related ESG risk and elevated capex plans that could weigh on its credit metrics.
Recommendation Reviewed: May 28, 2025
Recommendation Changed: December 06, 2024
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 28 May 2025As one of the world’s largest beverage companies KO operates across a diverse geographic footprint and generates stable and robust free cash flow. Management has expressed support for the high-A ratings profile and targets net leverage of 2-2.5x.
MRQ leverage was below targeted levels to maintain flexibility around a pending tax liability case and earn out payments for Fairlife. The court recently levied a judgment of $6.0 bn against KO, although the case has moved on to the appeals process.
We see a path for KO to maintain stable ratings through the litigation, and note that proceeds from a planned IPO of the company’s African bottling group could help address the liability.
Business Description
AS OF 28 May 2025- KO is the world's largest beverage company, owning, licensing, and marketing numerous brands in over 200 countries worldwide. It has 4 of the world's top 5 nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Fanta and Sprite.
- KO distributes its product through independent and company-controlled bottling distribution operations. KO largely refranchised its wholly-owned bottlers, selling the operations to independent bottlers. This strategy reduced capital intensity and expanded margins.
- KO has two primary businesses: Beverage Concentrates (59% of revenue) and Finished Sparkling & Still Beverages (41% of revenue). KO uses unit case volume growth and concentrate sales volume to evaluate performance.
- In 2024, the Coca-Cola system sold 33.7 bn unit cases of products worldwide, comprised of 69% from sparkling beverages and 47% from trademark Coca-Cola. The system has broad international exposure, with 84% of unit case volume generated outside the U.S.
Risk & Catalysts
AS OF 28 May 2025The unfavorable U.S. tax ruling could still result in some leverage creep depending on the ultimate outcome. KO is appealing the ruling, and we expect recent sales growth and proceeds from the planned IPO of the African bottling operations will mitigate the impact of any eventual penalty on the credit profile.
KO has a $6+ bn earn-out payment in 2025 related to the Fairlife acquisition, which will likely bring KO to the new issue market.
Management has expressed interest in expanding its presence over time in the alcoholic beverage category, although to this point the company has limited its involvement to licensing arrangements for its soft drink brands with large-scale brewers and distillers.
Key Metric
AS OF 28 May 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Revenue | 38,658 | 43,046 | 45,784 | 46,897 | 46,708 |
| EBITDA | 12,898 | 13,961 | 14,719 | 15,446 | 15,480 |
| EBITDA Margin | 33.4% | 32.4% | 32.1% | 32.9% | 33.1% |
| EBITDA-CAPEX-INT % of Revenues | 27.9% | 26.9% | 24.8% | 25.0% | 25.3% |
| Total Debt | 42,761 | 39,149 | 42,064 | 44,522 | 48,948 |
| Net Debt | 31,835 | 28,587 | 29,701 | 31,674 | 36,952 |
| Net Leverage | 2.5x | 2.0x | 2.0x | 2.1x | 2.4x |
| EV / EBITDA | 22.4x | 21.8x | 19.4x | 19.5x | 22.3x |
CreditSight View Comment
AS OF 19 Mar 2025We recently upgraded our view on KO from Market perform to Outperform to confer a slight preference for the credit over its high-A beverage peer, PepsiCo, at similar levels. We view both credits as core holds, but our updated view reflects increased comfort with KO’s ability to navigate an expected tax liabilities related to U.S. Tax Court litigation, as well as earnout payments related to the Fairlife acquisition. KO has reported steady organic growth led by continued pricing benefits and stable consumption trends across its portfolio of soft drinks. Management guides to a net leverage target of 2-2.5x and we expect the company to maintain metrics in that range over the medium term.
Recommendation Reviewed: March 19, 2025
Recommendation Changed: January 16, 2025
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 28 May 2025SBUX operates and licenses Starbucks cafe locations. Management has historically targeted lease-adjusted leverage of under 3x and has expressed support for the current, high-BBB ratings profile.
Recent results showed headwinds from lower traffic across the company’s locations in the U.S. and weak results in its second-largest market, China, due to increased competition in the market and cautious consumer behavior in the region.
SBUX navigated a volatile 2024, which included activist investments and an abrupt CEO change. While new CEO Brian Niccol is an experienced restaurant operator, we have reservations about the company’s restaurant reimaging plans.
Business Description
AS OF 28 May 2025- SBUX is a leading coffee roaster and retailer. The company operates and licenses over 40,000 Starbucks locations worldwide where it sells premium coffee beverages as well as other specialty drinks and prepared foods. Slightly over half the locations are company operated (52%) and the rest are licensed to third party operators.
- In F2024, SBUX generated $36.2 bn in revenue and $7.0 bn in adjusted EBITDA. SBUX has three reporting segments: N. America (75% of F2024 revenue), which covers cafes in the U.S. and Canada; International (20%), which includes China, Japan, Latin America, and EMEA; and Channel Development (4.9%) which includes revenue from other branded products sold outside retail locations through partnerships with large consumer companies such as Nestle and PepsiCo.
- On a geographic basis, SBUX's two largest regions are the U.S. (42% of cafes), and China (19%).
Risk & Catalysts
AS OF 28 May 2025In response to the activist attacks, SBUX announced an unexpected change in CEO and hired Brian Niccol, a veteran of the quick service restaurant industry with a successful track record at Taco Bell and Chipotle.
Lower discretionary spending in the U.S. could continue to weigh on SBUX’s sales outlook. We view its premium-priced beverage offerings as having significant risk of consumer trade down into more value-oriented options.
Investments behind the company’s new store imaging have increased costs and weighed on margins, in large part due to significant investments in labor.
Key Metric
AS OF 28 May 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue | 29,061 | 32,250 | 35,976 | 36,176 | 36,347 |
| EBITDA | 6,775 | 6,385 | 7,252 | 7,001 | 6,340 |
| EBITDA Margin | 23.3% | 19.8% | 20.2% | 19.4% | 17.4% |
| EBITDA-Capex to Revenue | 18.3% | 14.1% | 13.7% | 11.7% | 9.7% |
| Total Debt | 14,616 | 15,044 | 15,400 | 15,568 | 15,572 |
| Net Debt | 8,160 | 12,226 | 11,848 | 12,282 | 12,900 |
| Net Leverage | 1.2x | 1.9x | 1.6x | 1.8x | 2.0x |
| Lease Adjusted Debt to EBITDAR | 2.9x | 3.1x | 2.8x | 3.0x | 3.2x |
| EV / EBITDA | 20.4x | 17.1x | 16.1x | 17.6x | 19.6x |
CreditSight View Comment
AS OF 06 May 2025SBUX is in the early phases of an operational turnaround plan intent on reigniting foot traffic by improving the in-store experience. The “Back to Starbucks” program has come at the expense of margin due to heavy investments in labor. While the plan is ultimately to increase transactions and tickets due to improved experiences, we are skeptical that the company will be able to recoup the margin. Also, the strategy comes at a time when economic uncertainty could weigh on discretionary purchases. Also, recent results have weighed on the company’s share price, which could test the patience of equity investors and possibly draw activist attention to the name again. We recommend avoiding this risks in favor of McDonald’s bonds, despite ~20 bp of incremental spreads at SBUX.
Recommendation Reviewed: May 06, 2025
Recommendation Changed: May 01, 2024
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 28 May 2025Relative to food-oriented peers, KDP benefits from exposure to faster growing, higher margin beverage & coffee categories. However, coffee categories are exposed to underlying commodity swings.
Management has adopted a more conservative posture on leverage and reduced its target by half a turn to 2-2.5x for the near-term. The reduced leverage target implies roughly a full turn of improvement from current levels in the mid-3x area.
Despite the current emphasis on leverage reduction, management has maintained that M&A remains a longer-term priority. Still, we are comfortable with KDP credit and favor taking on any spread pickup opportunities over F&B peers.
Business Description
AS OF 28 May 2025- KDP is the result of a July 2018 merger between Dr Pepper Snapple and Keurig Green Mountain. The merger combined a traditional soft drinks company (DPS) with a faster growing coffee platform that includes the market's leading single serve brewing system.
- The merger was backed by JAB Holdings via its affiliate, Maple Holdings BV. While JAB has trimmed its stake in recent periods, it still controls ~16% of the shares.
- KDP recorded $15.4 bn in 2024 net sales with adjusted EBITDA of $4.5 bn. The business is heavily concentrated in North America, and results are reported across three operating segments: U.S. Refreshment Beverages (61% of 2024 sales), U.S. Coffee (26% of sales), and International (13.0% of sales).
- Examples of KDP's key brands include Dr Pepper, Keurig, Snapple, Canada Dry, 7Up, Mott's, and A&W. The company also partners with other leading coffee brands from various producers via licensing and manufacturing agreements for K-cups.
Risk & Catalysts
AS OF 28 May 2025Management has historically guided to M&A as a key capital allocation priority, but recent deal activity has been biased toward bolt-on opportunities and management emphasized integrating recently purchased assets while bringing leverage down to the 2.5x area.
KDP has exposure to elevated input costs, particularly for green coffee beans. KDP took pricing in coffee, and is expecting some elasticity, but they plan to management to stable profit dollars, and could seek to raise prices further in 2025.
Given the increased value-seeking mindset of consumers, KDP could see a tradedown benefit if coffee prices rise across the board.
Key Metric
AS OF 28 May 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Revenue | 12,683 | 14,057 | 14,814 | 15,351 | 15,518 |
| EBITDA | 3,908 | 3,932 | 4,189 | 4,537 | 4,565 |
| EBITDA Margin | 30.8% | 28.0% | 28.3% | 29.6% | 29.4% |
| EBITDA-CAPEX-INT % of Revenues | 23.5% | 20.5% | 21.7% | 21.7% | 22.1% |
| Total Debt | 12,024 | 12,104 | 13,308 | 15,595 | 15,957 |
| Net Debt | 11,457 | 11,569 | 13,041 | 15,085 | 15,304 |
| Net Leverage | 2.9x | 2.9x | 3.1x | 3.3x | 3.4x |
| EV / EBITDA | 16.3x | 15.8x | 14.2x | 12.9x | 13.5x |
CreditSight View Comment
AS OF 28 Apr 2025As a beverage company KDP’s portfolio has resistant characteristics if we see greater economic weakness, but its Coffee Systems business does have exposure to discretionary spending and has seen some impacts from retailer inventory management actions and private label pressure. Also, the company is experiencing increased price elasticity in its coffee as is raises prices to offset underlying commodity inflation. On the plus side, KDP recently adopted a more conservative leverage target of 2-2.5x vs current levels in the mid-3x area. Management’s medium-to long-term capital allocation plan does consider strategic M&A, but we like that management has been less vocal about large M&A of late, and has also discussed asset disposals.
Recommendation Reviewed: April 28, 2025
Recommendation Changed: October 27, 2023
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 28 May 2025Pfizer has ample financial resources, strong ability to de-lever, and sizeable M&A capacity at current ratings.
Pfizer faces meaningful losses of exclusivity come the middle part of the decade. Management has guided to a ~$17 bn negative revenue impact from patent losses in 2025-30, including for drugs such as Xeljanz (2025), Eliquis (2026), Ibrance (2027), and Xtandi (2027).
Management expects to offset this impact with growth from pipeline development (+$20 bn of revenues by 2030) and business development (+$25 bn of revenues by 2030).
Business Description
AS OF 28 May 2025- Pfizer is a research-based, global biopharma company with focuses in immunology, metabolic disease, oncology, vaccines, neuroscience, and rare disease.
- PFE has completed a number of major acquisitions and divestitures in recent years. In 2009, the company acquired Wyeth for $68 bn, increasing its size by approximately 50%. Subsequently, PFE completed the $17 bn acquisition of Hospira, ~$12 bn acquisition of Biohaven, ~$6 bn acquisition of Arena, ~$5 bn acquisition of GBT, ~$14 bn takeover of Medivation, ~$43 bn acquisition of Seagen and $6.3 bn divestiture of its remaining stake in Haleon.
- The company has also completed the sale of its Nutrition business to Nestle for $11.9 bn and the disposition of its animal health business, Zoetis. More recently, the company executed the separation of its Consumer and Upjohn businesses through distinct transactions.
Risk & Catalysts
AS OF 28 May 2025Pfizer has been active with portfolio repositioning, executing the separations of its Consumer Healthcare and Established Brands (Upjohn) businesses in recent years. These transactions have resulted in weaker diversification and greater exposure to patent expirations.
Due to upcoming patent losses, Pfizer has been extremely active with M&A. The company recently completed the $43 bn acquisition of Seagen, which resulted in well over a turn of leverage deterioration.
Pfizer is also exploring the sale of its hospital drugs unit. The unit was formed through the $17 bn acquisition of Hospira in 2015. We suspect that divestiture proceeds would be used primarily for business development.
Key Metric
AS OF 28 May 2025| $ mn | Y20 | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|---|
| Revenue | 41,651 | 81,288 | 101,175 | 59,553 | 63,627 | 62,463 |
| Gross Profit | 33,167 | 50,467 | 66,831 | 34,599 | 45,776 | 45,146 |
| R&D | (8,709) | (10,360) | (11,428) | (10,679) | (10,822) | (10,532) |
| SG&A | (11,597) | (12,703) | (13,677) | (14,771) | (14,730) | (14,266) |
| Adj. EBITDA | 18,027 | 33,354 | 46,153 | 22,904 | 25,867 | 24,991 |
| Total Debt | 39,836 | 38,436 | 35,829 | 71,888 | 64,351 | 62,109 |
| Gross Leverage | 2.2x | 1.2x | 0.8x | 3.1x | 2.5x | 2.5x |
| Interest Coverage | 13.1x | 26.6x | 46.8x | 39.2x | 10.2x | 10.4x |
CreditSight View Comment
AS OF 27 May 2025We reiterate our Outperform recommendation on Pfizer. While we are less-than-impressed with Pfizer’s late-stage pipeline, we see the spread pickup over peers such as BMY (M/P) and MRK (U/P) as worthy of adding exposure given PFE’s financial flexibility.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: January 05, 2024
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank