Richter Gedeon - Royalty Income From Vryalar And FX Boosted Profit

 

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 Q3/19 results:

 

 

- Total revenues were HUF 127.5 bn (+28% YoY ) 5% higher than cons. estimate and 2% better than our estimate.

 

- Reported EBIT amounted HUF 17.7 bn (vs. HUF 15.9 bn in Q3/18) including milestone of HUF 12 bn related to Vralyar and impaiments of HUF 5.9 bn on Esmya. Clean EBIT amounted to HUF 21.1 bn (+54% YoY) on our estimate, while clean EBIT margin came in at 16.5% vs. 13.7% in Q3/18.

 

- 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 54.8% from 59.2% YoY mainly due to higher low-margin Romanian wholesale revenue. Increasing Vraylar sales (USD 41.3 mn vs. USD 25.3 mn in Q3/18 and USD 35.5 mn in Q2/19), and higher Esmya and Bemfola sales proved to be supportative, however.

 

- Net OpEx after adjusting for one-offs went up by 8% YoY due to higher wage and serialization costs.

 

- Reported net income came in at HUF 22.1 bn compared to HUF 8.8 bn in Q3/18. Clean net income was HUF 25.2 bn, on our estimate, vs. HUF 6.9 bn int he same period last year due to massive FX gains.

 

Cash flows from operation dropped by 28% in HUF YoY to HUF 68.1 bn in the first nine months of the year dampened by higher W/C needs. CapEx was 8% lower YoY at HUF 21.8 bn, thus free cash flow before dividend decreased by 35% to HUF 46.3 bn in the first nine months of 2019. Net cash and equivalents and investments in securities altogether amounted to ca. HUF 735 a share at the end of September 2019, representing ca.13% of Richter’s market cap.

We are going to revise our 12-m TP estimate (currently at HUF 6,300 a share), and our earnings estimates for 2019 and 2020, respectively. We reiterate our Accumulate rating on Richter.

 

 

 

Attila Vago
Senior Analyst

CONCORDE SECURITIES LTD.

Hillside
55-61 Alkotás street, H-1123 Budapest.
Phone:  | Fax: | Mobile:
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MEMBER OF THE CONCORDE GROUP

 

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