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Hikma back on the upgrade path

Market defying growth in the generics business means annual revenues and profits are expected to beat previous guidance
August 9, 2019

Hikma (HIK) has silenced those who doubted its ability to keep beating expectations by upping its guidance for 2019 following an 11 per cent increase in sales in its generic drugs division in the first half of the year.

IC TIP: Buy at 1,985p

The performance is particularly impressive in the context of the wider market, where regulators are increasingly promoting more innovative drugs and competitive pressure is sending the prices of generic drugs down. Hikma has offset these challenges by focusing on specialised, quality generic treatments that can demand a higher price.

This also helped boost core operating margins in the generics division by 10 percentage points, which offset a slight decline in core operating margins in the flagship injectables business, where competitive pressure is rising in the US. Still, the division reported a 7 per cent increase in revenues at constant currencies to $432m (£357m), while a core operating margin of 39 per cent could hardly be scorned. A strong pipeline of products, thanks to higher research and development expenditure, means management is confident the injectables division can deliver sales and profits at the top end of guidance.

Consensus forecasts suggest annual earnings will be flat on last year at $1.36 per share – but further upgrades could be on the cards.

HIKMA (HIK)    
ORD PRICE:1,985pMARKET VALUE:£4.81bn
TOUCH:1,985-1,990p12-MONTH HIGH/LOW:2,089p1,492p
DIVIDEND YIELD:1.7%PE RATIO:16
NET ASSET VALUE:756¢NET DEBT:20%
Half-year to 30 JunTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20180.9814144.012
20191.0522676.414
% change+7+60+74+17
Ex-div:22 Aug   
Payment:23 Sep   
*Includes intangible assets of $801m, or 331¢ a share   £1=$1.21