More than a single drug company

This is a transfer of coverage as after 30 years of equity research at Concorde
Securities, Attila Vago left the Company.
 In line with our previous approach, we are still eager to evaluate Richter with a sum-of-theparts
method. We find this very important in case of Richter, as it consists of four well
separated segments with different prospects and profitability. These are the Women’s
Healthcare (WHC), the Neuropsychiatry (CNS or central nervous system), the
Biotechnology (BIO) and the General Medicine (GM) segments.
 Our 12m ex-div TP is set at 12,990 HUF/sh, implying a 46% total return upside
potential including a dividend yield of c.5%. We are Buy-rated on the stock. On a
SOTP basis, we estimate that WHC is worth 4,549 HUF per share, CNS (incl. royalties
from Vraylar) is worth 5,351 HUF per share, BIO is worth 360 HUF per share, while GM is
worth 2,628 HUF per share. Richter had a very strong balance sheet and ample liquidity.
 Richter trades at a depressed 24E P/E of 6.8x and 25E P/E of 5.7x, on our estimates,
compared to the 5Y average 12m blended forward PE of 11.6x. It’s worth mentioning
that the historic valuation of Richter is clearly distorted by the recent 3 years as forward
multiples applied for the stock has shrunk by 40-50% on our estimate vs pre-covid years.
 We are of the view that the undervaluation of the stock is not justified. Richter is expected
to boost its EBIT by a whopping 67% in 2024 driven partly by less volatile FX environment
as well as the success of Vraylar, which will contribute to the top and bottom-line growth
until 2029. In the meantime, Richter will have plenty of time and cash to prepare for the
next decade in a financial sense, meaning that the R&D expenses or product acquisitions
should turn into profitable investments. Product developments and launches, as well as
the shift toward a mid-sized specialty pharma company should ensure that Richter will be
able to maintain a high profitability after the expiry of Vraylar’s patent in September 2029.