Bemfola weighed on 1Q17 earnings, but margin pressure is evident
Richter’s reported 1Q17 gross margin of 55.1% was notably weaker than both the market’s and our expectations. The positive takeaway from yesterday’s call, in our view, is that the frontloading of the Finox (Bemfola) integration costs and a small negative inventory valuation adjustment are to blame for c.280bps of missing gross margin and should disappear in 2H17E. Nevertheless, the message that price erosion, regulatory costs (explained below) and wage inflation remain was clear, and we expect that, when we and the street revise our forecasts earnings, downgrades are, on balance, the most likely result. The stock has traded off of its historic highs, but on a 2017E PER of c.21x and EV/EBITDA of 13.1x, we believe it is priced for perfection and that this quarter should give investors pause in discounting management’s EBIT margin guidance too quickly (which now stands at 11-12%, up from 11% in February). We remain HOLDers of the stock at these levels.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.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.