Richter Gedeon - Unexpected Impairment Losses On Esmya Once Again

Gedeon Richter - Instant Earnings Comment
Rating: Accumulate (unch.)

Target price (12-month): HUF 6,320 (unch.) 

Current share price: HUF 5,735

 

Key points for Q4/18 results:

 

 

- Total revenues were HUF 121.6 bn (+10% YoY ) higher than cons. estimate of HUF 111.9 bn and our estimate of HUF 110.5 bn.

 

- Reported EBIT amounted HUF -7.6 bn (vs. HUF -32.9 bn in Q4/17) including completely unexpected impariment losses of HUF 24.3 bn related to Esmya. Clean EBIT amounted to HUF 16.7 bn (+6% YoY). Consequently, clean EBIT margin came in at 13.7% in Q4/18 vs. 14.3% in Q4/17, and thus 90 bps below the median of analysts’ expectations of 14.6%.

 

- Clean operating results were down predominantly due to lower net sales, with lower Esmya sales and continued depreciation of the RUB against the HUF).

 

- Gross margin dropped to 53.2% from 55.8% YoY mainly due to higher low-margin Romanian wholesale revenue. Higher Vraylar sales (USD 27.3 mn vs. USD 15.3 mn in Q4/17), advancing Bemfola sales (EUR 11.3 mn vs. EUR 9.6 mn in Q4/17) proved helpful, however.

 

- OpEx after adjusted for one-off items rose 5% YoY due to higher crawl-back payments and wages.

 

- Reported net income came in at HUF -16.4 bn compared to HUF -35.7 bn in Q4/17. Clean net income was HUF 11 bn in line with market expectations and our estimate. The derecognition of deferred tax assets led a reduction in deferred tax assets.