Richter Gedeon - Returning To Profitability
Gedeon Richter - Instant Earnings Comment
Rating: Accumulate (unch.)
Target price (12-month): HUF 6,300 (unch.)
Current share price: HUF 5,140
Key points for Q2/19 results:
- Total revenues were HUF 119.9 bn (+9% YoY ) 3% higher than cons. estimate and our estimate.
- Reported EBIT amounted HUF 17.2 bn (vs. HUF 18 bn in Q2/18) including milestone of HUF 3 bn related to Vralyar, compared to cons. est. of HUF 16.6 bn. Clean EBIT amounted to HUF 14 bn (-6% YoY), while clean EBIT margin came in at 11.7% vs. 13.5% in Q2/18.
- Clean operating results improved on higher net sales, predominantly driven by advancing Vraylar sales and the weaker HUF against the EUR, the USD and the RUB.
- Cons. gross margin dropped to 56.3% from 58.6% YoY mainly due to higher low-margin Romanian wholesale revenue. Higher Vraylar sales (USD 32.4 mn vs. USD 21.9 mn in Q2/18 and USD 27.6 mn in Q1/19), Esmya and Bemfola sales proved to be supportative, however.
- OpEx were lower by 8% QoQ due to the lower costs of serialization.
- Reported net income came in at HUF 17.5 bn compared to HUF 24.3 bn in Q2/187. Clean net income was HUF 14.4 bn vs. HUF 21.3 bn int he same period of last year due to lower FX gains.
Cash flows from operation dropped by 27% in HUF YoY to HUF 46 bn in the first six months of the year dampened by higher W/C needs. CapEx was up 10% YoY to HUF 15 bn, thus free cash flow before dividend decreased by 37% to HUF 31 bn in H1/19 compared to HUF 50 bn in H1/18. Net cash and equivalents and investments in securities altogether amounted to ca. HUF 778 a share at the end of June 2019, representing ca.15% of yesterday’s closing share price
We maintain our 12-m TP estimate at HUF 6,300 a share, implying a 23% upside potential from the current share price. We reiterate our Accumulate rating on Richter.
Attila Vago
Senior Analyst
CONCORDE SECURITIES LTD.
Alkotás Point
50 Alkotás street, H-1123 Budapest.
Phone: | Fax: | Mobile:
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MEMBER OF THE CONCORDE GROUP
Chemical Works of Richter Gedeon is a multinational pharmaceutical company that is engaged in the research, development, production and marketing and trade of pharmaceutical products. Co.'s activities are divided into two major business segments: Pharmaceutical, including research, development and manufacturing of pharmaceutical products; and Wholesale and Retail including wholesale and retail trade through the distribution chain as well as marketing of its products. Co. is primarily engaged in production of gynecological, cardiovascular and gastroenterological products, antibiotics, antimicotics, OTC and medicines for treatment of the central nervous system.
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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