Gedeon Richter confirmed at HOLD, TP HUF 7,000 - Model update: Modest upside after share price rally in 4Q 19
We remain neutral on Gedeon Richter after the share price appreciation in 4Q 19. We reckon that our new 12m target price of HUF 7,000 (HUF 5,700) reflects the market optimism regarding Vraylar and offers only a moderate upside potential from current levels. The increase of our target price was driven primarily by (i) an upward revision of Vraylars contribution following the approval of the new indication by the FDA last May and (ii) a downward revision of Hungarys risk-free rate, which had a positive impact of ca. HUF 500/share on our DCF-based valuation. Although the defensiveness of Richter could make it a preferred bet in the current market environment, we believe that its current valuation is already reflecting the expected improvement of Vraylars royalty stream, therefore, we keep Richter on HOLD.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.
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