Feb 2022
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Why We Bought in 2021 - P/E ratio just below
12
vs the industry average of
85.47
- Growing dividend, easily covered by earnings and a low payout ratio of around
20%
- Increased
revenue, gross profit and earnings per share in 2020
- Manufactures a COVID drug -
remdesivir
What has happened in 2022
We invested in HIK back in February 2021 after a
strong
set of results suggested it was undervalued. The company then released its
half-year results
in August 2021, showing a
7%
increase in revenue, a
15%
increase in operating profit and an
impressive
operating margin of
25%.
It also
improved
its full-year outlook, with predicted growth in its injectables, generic and branded sectors.
- P/E ratio just below 12 vs the industry average of 85.47
- Growing dividend, easily covered by earnings and a low payout ratio of around 20%
- Increased revenue, gross profit and earnings per share in 2020
- Manufactures a COVID drug - remdesivir
What has happened in 2022
We invested in HIK back in February 2021 after a
strong
set of results suggested it was undervalued. The company then released its
half-year results
in August 2021, showing a
7%
increase in revenue, a
15%
increase in operating profit and an
impressive
operating margin of
25%.
It also
improved
its full-year outlook, with predicted growth in its injectables, generic and branded sectors.
Source: HIKMA PLCFantastic news! Or so we thought...
The results were greeted with a
6% drop in share price, which steadily dropped for the remainder of 2021 and now sits at about
-14%.
In the interim, HIK has continued to grow the business, acquiring a Canadian injectables company, Teligent, which holds a portfolio of 25 sterile injectable products, three licensed ophthalmic products and
seven pipeline products.
Hikma Injectables President
Riad Mishlawi said, "This acquisition further expands our portfolio of essential sterile injectable medicines and gives Hikma an entry into the
highly attractive Canadian injectables market. The combination of our sales and marketing expertise and this portfolio of exciting products will enable us to expand our North American business and develop a
solid position in this important market."
They have also added two biosimilar drugs to their portfolio after signing a license agreement with Hungarian multinational pharmaceutical and biotechnology firm
Gedeon Richter PLC. The drugs are used to treat of osteoporosis and bone fractures.
Hikma Chief Executive Siggi Olafsson said, "This key collaboration is
highly complementary and
strengthens our US oncology and auto-immune offerings. Gedeon Richter brings strong technical capabilities for biological products which, combined with our well-established commercial presence in the US market makes for a partnership with
exciting potential."
HIK's debt has increased slightly since Feb 2021, but as you can see from
SimplyWallStreet's analysis
above, this has been more than offset by
increased earnings.
Conclusion
Given HIK's
positive results, developments in the business and
drop in share price, the business is looking even more
undervalued than at this time last year. For that reason, we have decided to reinvest rather than to sell our position. HIK are looking to release full year results in February 2022, so we will be
very interested
to see whether the upgraded estimates come to fruition.
We will be adding to our
HIK investment on Tuesday.
