Krka Group 2017: Back on track, with dividend increase expected.
While in 2016 we had our fair doubts whether Krka Group business model is broken, profit severely slumping, Krka for now showed it was only a hiccup. Krka Group revenues increased by 7.8% YoY in 2017 while profit jumped by 40.7% to EUR 152.6m. This is above our expectations. With higher profit and Krka dividend policy of at least 50% pay-out, we can also expect a continuation of Krka past dividend growth. At current P/E 12.1x and EV/EBITDA 5.9x we see it as undervalued, target price being at EUR 65 (up EUR 1 from past report). Consequently buy recommendation is still warranted. This would also suggest that while 2016 is forgotten in terms of results, share price dynamic is still lagging this fact.
Krka is a public generic pharmaceutical company based in Slovenia. Co. is engaged in the development, production, sale and marketing of human health products (prescription and selfmedication pharmaceuticals and cosmetics), animal health products and health resort and tourist services. Co. focuses on a range of generic prescription pharmaceuticals, which are marketed under Co.'s own brands. Co. offers customers in over 70 countries a broad range of prescription pharmaceuticals, self-medication products and animal health and cosmetic products. Co.'s activities are supplemented by health resort and tourist services of Terme Krka.
ALTA Invest, investicijske storitve, d.d., (ALTA Invest, investment services, Inc.) is a part of ALTA Group, the biggest financial non-banking group in Slovenia. ALTA Invest has around 28% market share on the domestic Ljubljana Stock Exchange and has more than EUR 95m of assets under management.
Our trading advantage is our execution of large trading blocks with low impact on the market. We offer trading on several platforms on numerous markets, with a wide variety of financial instruments. Our advantage is also a research department, which is both sell side and buy side and has the far most extensive and regular coverage of domestic companies. We cover 9 companies on Ljubljana Stock Exchange, which is around 90% of Mcap on LJSE – and here we are practically the only local broker providing this kind of extensive and regular coverage for Slovenian companies.
A part of ALTA Group are ALTA Skladi, a mutual fund asset management company with roughly EUR 260m of asset under management. ALTA Group is also extensively involved in corporate finance projects and raised considerable assets (fixed income and equity) in the last two years for several companies.
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