Richter Gedeon - Cutting profit estimate for FY2018 but keeping rating unchanged - Earnings Review from Concorde Securities Ltd.

We tweaked our estimate for Richter’s FY2018 earnings recognizing that gross margin on pharma sales improved 300 bps YoY from 65% to 68% in Q1-3/18 as a combined result of growing royalty income received from Allergan on the sales of Vraylar in the U.S, an increase in the share of the high margin Chinese businesses, a decrease in the amount of sales proportional royalties and crawl-backs payable in respect of Esmya, lower cost of goods sold related to Bemfola as the negative impact of inventories valued at the time of the acquisition had ceased to exist, and of a sharper weakening in the CIS currencies against the HUF than previously projected, and finally lower-than expected Esmya sales (-69% YoY).