Redcare Pharmacy Strengthens Balance Sheet with Debt Restructuring

A significant refinancing milestone has been reached by Redcare Pharmacy, providing the company with enhanced financial flexibility. The full repayment of a convertible bond tranche shifts investor focus squarely onto whether the firm’s impressive revenue growth can finally translate into sustainable profitability.

The catalyst for recent market activity was Redcare's announcement that it settled a crucial portion of its convertible bond on January 21. The company repaid €64.5 million related to a bond issued in 2021 with a maturity extending to 2028. Bondholders exercised their put option, an action pre-announced on December 19, 2025.

This payment marks the substantial completion of a broader debt restructuring initiative:

• April 2025: Repurchase of €157.9 million from the original €225 million convertible bond.
• April 2025: Issuance of a new €300 million convertible bond maturing in 2032 with a 1.75% coupon.
• January 21, 2026: Final payment of €64.5 million on the old bond.
• Remaining Balance: Only €2.6 million of the old bond now outstanding.

Redcare entered this final settlement from a position of strength. As of September 30, 2025, the company held €265.6 million in liquid funds, a notable increase from €177.6 million at the end of 2024. The outcome is a stretched maturity profile with a low coupon rate, a positive development for financial planning in the coming years.

Share Price Finds Technical Support

Following several consecutive days of losses, the MDAX-listed shares staged a noticeable recovery. At its lowest point yesterday, the price neared its 52-week trough before a pronounced counter-movement took hold. Trading activity on January 21 was particularly telling, with volume reaching 250,310 shares—more than triple the average of approximately 78,000—indicating the bond repayment activated many market participants.

While the stock remains down on a weekly basis, the recent rebound offers some technical relief after a decline of almost 7% over seven days. The broader picture, however, remains challenging. Over the past twelve months, the share price has lost roughly half its value and continues to trade well below its 200-day moving average, reflecting persistent market skepticism.

Operational Growth Meets OTC Disappointment

Operationally, Redcare continues to post robust growth figures. Preliminary data for 2025, released on January 7, reveals:

• Full-Year 2025 Revenue: €2.9 billion, a 24% year-on-year increase.
• Q4 Revenue: €794 million, up 18%.
• German Prescription (Rx) Revenue: €503 million, surging 98%.
• Active Customers: 13.9 million, a gain of 1.4 million.

The German prescription business, fueled by the ongoing rollout of the e-prescription system, showed exceptional strength with Rx sales nearly doubling. The expanding customer base also lays a solid foundation for future volume growth.

Should investors sell immediately? Or is it worth buying Redcare Pharmacy?

Despite these figures, the market reaction was negative, with shares falling 6.43% on the day of the release. The primary concern was weaker performance in the over-the-counter (OTC) segment. Non-Rx revenue grew by just 9% in the fourth quarter, missing expectations. Analysts point to rising competitive pressures, especially since competitor dm launched its own online pharmacy brand, "dm-med," in December 2025.

This combination of powerful Rx growth and slowing momentum in the higher-margin OTC business explains the market's continued caution. A key challenge will be whether Redcare can reaccelerate growth in the non-prescription segment or effectively manage the resulting margin pressure.

Divergent Analyst Views Amid Weakness

Despite the depressed share price, analyst opinions vary significantly. Some institutions view the current valuation as an opportunity, while others maintain a cautious stance.

Selected analyst ratings and price targets include:

• Deutsche Bank (Jan 9): "Buy," target price €200.
• Jefferies (Jan 13): "Buy," target price €150. The firm notably lists Redcare among its preferred European mid-cap stocks for 2026.
• Barclays (Jan 16): "Buy," target price €110, revised down from €130.
• UBS (Jan 7): "Neutral," target price €74.
• Baader Bank (Jan 7): "Buy," no specific target provided.

The average price target among these stands at approximately €133.78, well above the current trading level around €61. The wide range of targets—from €74 to €200—highlights the considerable divergence in views regarding the company's medium-term earnings potential.

The Path Forward: A Profitability Focus

With the balance sheet restructuring largely complete, the strategic emphasis now shifts to operational execution. The next key date is March 4, 2026, when Redcare will publish its full 2025 annual report, including its outlook. This report will reveal whether the adjusted EBITDA margin of 2.4% achieved in the third quarter was maintained or improved, and how intensifying OTC competition is impacting profitability.

The core strategic focus remains on expanding the higher-margin prescription business, which continues to benefit from the tailwind of Germany's e-prescription system. The current valuation—with a price-to-sales ratio around 0.5—signals that the market requires concrete evidence that robust top-line growth can be converted into stable margins and reliable earnings in the medium term.