Richter’s Q1/23 results beat estimates

Richter posted clean EBIT of HUF 54.1bn (+44% YoY) on net sales HUF 209.7bn (+24.8%
YoY) for Q1/23. Clean EBIT was ahead by 19% of the consensus estimate of HUF 45.4bn
(but it was 9% better than our estimate), while net revenue was also 4% higher than
consensus forecast of HUF 202.4bn and in line with our estimate. As a result, clean EBIT
(incl. extra taxes of HUF 3.4bn) margin stood at 25.8% compared to consensus estimate
of 22.3% and 22.3% YoY, respectively.
Richter recorded no extra income in Q1/23. The extra tax levied on the pharmaceutical
industry at the end of December 2022 amounted to HUF 3.4bn.Clean net income came in
at HUF 39.2bn vs. HUF 37.1bn profit YoY, significantly higher than the consensus estimate
of HUF 27.2bn, and our estimate of HUF 26.8bn, driven mainly by FX.
o Key positives:
1. Revenue grew by 25% YoY in HUF driven by FX and growing revenue in specialty
pharma products
2. Pharma gross margin and clean EBIT rose significantly driven mainly by CNS
(Vraylar) and WHC sales.
3. WHC sales increased by 30% YoY in HUF, mainly thanks to Evra sales and
accounted for 35% of total phara sales vs. 33% YoY. Vraylar sales went up by 48%
in HUF YoY.
4. Financial losses and tax payments were lower than expected. Richter said that FX
impact on sales were positive to the extent of as much as HUF 22bn in Q1/23 while
its impact on gross profit and EBIT was HUF 17bn and HUF 13bn, respectively

Key negatives
1. OCF dropped by 37% YoY due mainly to lower other non-cash operating items. Gross margin on pharmaceutical products went up from 68.5% to 70% YoY, but
remained unchanged after adjusting for the positive FX impact, while consolidated gross
margin also improved from 57% to 61% and was higher than the consensus estimate of
58%. If not accounting for Vraylar, Reagila, Evra and Bemfola gross margin on
pharmaceutical products remained unchanged at around 60% YoY on our calculation.