On Tuesday, Citi updated its outlook on Hikma Pharmaceuticals (OTC:HKMPY) Plc (HIK:LN) (OTC: HKMPF) shares, increasing the price target to GBP28.45 from GBP27.70. The firm continues to endorse a Buy rating for the pharmaceutical company's stock. The revision follows a positive assessment of the latest industry data and the company's strategic initiatives.
Citi's analysis was influenced by IQVIA's April data, which showed robust growth trends for Hikma's Injectable and US Generics divisions. The Injectables sector in the US exhibited a 15% year-over-year growth and a 20% increase year-to-date.
The US Generics division, which accounts for 30% of sales and 20% of EBIT, is working towards a more stable business model with a target EBIT of $100-120 million. This goal is to be achieved through enhanced contract manufacturing and an expanded Specialty portfolio.
The firm also highlighted Hikma's Branded division, which is expected to contribute 24% of sales and 22% of EBIT by 2024 estimates. Efforts to refine the product mix in this division are anticipated to yield a significant rise in profitability.
Additionally, the Injectables business is projected to continue its high-single-digit growth with favorable margins. Hikma's foray into the US compounding market is also on track, with expectations to reach a break-even point by 2025.
Citi's revised price target is based on a net present value (NPV) approach, taking into account a more optimistic outlook for the Branded and Injectables divisions. The firm's estimates for earnings per share (EPS) compound annual growth rate (CAGR) from 2024 to 2029 are set at 12%, positioning Citi's projections 2-18% ahead of the consensus. The bull-bear valuation range provided by Citi spans from GBP33.6 to GBP18.1.
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