Hikma Pharmaceuticals Plc (HIK) is engaged in the development, manufacturing, and marketing of generic, branded, and in-licensed pharmaceutical products in all forms. The company has three reporting segments being Injectables, Generics and Branded. The company operates worldwide and the United States, the United Kingdom, the middle east and Africa being the major markets.

Key Statistics


Financial Results and Review – Financial Year 2018 ($, million)

(Source: Annual Report, Company Website)
 
The Group’s revenue grew by 7 per cent to $2,070 million in Financial year ending December 2018, and the core revenue surged by 7 per cent to $2,076 million in FY2018 as compared to $1,936 million in FY2017, reflecting good demand for in-market products and new product launches. In FY18, Gross profit stood at $1,050 million as compared to $967 million in 2017. There was an increase of 9 per cent due to the consolidation of Generics manufacturing facilities and US distribution facilities of the company and restructuring of Columbus facility. Excluding the related costs, Group’s core gross profit increased by 10 per cent to $1,072 million in FY2018 as compared to $973 million in 2017, primarily due to a strong improvement in the profitability of Generics business. The company reported an operating profit of $371 million in FY2018 as compared to an operating loss of $747 million reported in FY2017. Excluding the impact of amortisation other than software and exceptional items, Group’s core operating profit surged by 19 per cent to $460 million in FY 2018 against $386 million in FY2017. The Profit before tax for FY2018 stood at $293 million against a loss before tax of $738 million in FY2017. Reported Profit attributable to shareholders stood at $282 million in FY2018 as compared to a loss of $843 million in FY2017. The group’s basic earnings per share stood at 117 cents in FY2018.

Share Price Performance

Daily Chart as at April-29-19, before the market close(Source: Thomson Reuters)

On 29th April 2019, at the time of writing (before the market close, GMT 10:17 AM), Hikma Pharmaceuticals Plcshares were trading at GBX 1,705.50, up by 0.47 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 2,089.00/GBX 1,271.50. The outstanding market capitalisation was around £4.10 billion with a dividend yield of 1.73 per cent.

Valuation Methodology
 
Conclusion
The company had shown an improvement in its financial performance. There has been astrong demand for its existing as well as newly launched products in the market. The current trading levels indicate the stock movement towards 52-week high withsupport coming from a few growth drivers like increased financial performance in terms of revenue from many geographic areas like US & Egypt and positivity coming from economic forecasts like improvement in the US Gx environment which is monitored by the American National Standards Institute (ANSI) and International Society for Automation (ISA). The company also has a strong management team which will help in achieving sustainable growth in the long term. Based on strong fundamental performance and the valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 1,697.50 (as on 26th April 2019) with single-digit upside potential based on 10.35x NTM EV/EBITDA (approx.) on FY19E EBITDA.

*All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.7729 GBP
*The buy recommendation is also valid for the current price as covered in the report (as on April-29-19).

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