Hikma Pharmaceuticals (LON: HIK), the generic and branded drugmaker, saw its shares jump yesterday after half-year results showed core operating profit rising far more than revenue, a margin-led beat that brokers said was well ahead of expectations.
The stock closed yesterday at 1,699p, up 8.1% from Wednesday’s close of 1,571p, having touched an intraday high of 1,755p, an 11.7% gain on the day. That leaves the shares well above their 52-week low of 1,153.7p, though still below their 52-week high of 1,812.7p.
Hikma’s half-year results, released before yesterday’s open, showed core operating profit up 9% to $405m, against a more modest 4% rise in revenue to $1,728m. Chief executive Said Darwazah said: “I am pleased to report a solid first half with performance in line with our expectations, including 9% growth in core operating profit, and I am encouraged by the positive momentum we are seeing across the organisation.” The company also lifted its Branded division’s guidance to the top end of its previous 6%-8% growth range.
Brokers traced the beat to two divisions. Branded revenue grew 15% to $502m with core operating profit up 23% and a 32.5% margin, which Stifel called a multi-year high for that unit. Injectables revenue of $685m was roughly flat and slightly below consensus, but its margin held at 27.6%, ahead of the roughly 26.7% consensus cited by brokers, even as the division’s core operating profit fell 8%. The interim dividend rose 6% to 38 cents per share.
Peel Hunt and Stifel both kept Buy ratings, at 1,880p and 1,700p respectively. Stifel analysts Christian Glennie and James Orsborne said the results should consolidate a recovery from three-year lows, describing the valuation, on a broker-cited 9.3 times this year’s earnings and a 4.2% dividend yield, as attractive and undemanding against UK healthcare peers.
Stifel’s 1,700p target sits just above yesterday’s 1,699p close, implying brokers see the shares as fairly valued for now even as they remain constructive on the stock’s longer-term recovery.