ANALYST VIEW - Credit Suisse sharply raises target price for Hungary's Richter

“Notwithstanding the conservative outlook (of Richter's management), few identifiable near term triggers and the continued lack of financial visibility (due to FX), we retain our “fundamental based" Outperform rating on Richter," the analysts of CS said.

Credit Suisse has provided the following key arguments for the sharp TP hike and the unchanged rating:

1. “Gross margins are the determinants of long-term profitability, and Richter has consistently maintained best-in-class margins among its EMEA peers." CS expects the contribution from the profit sharing agreements in US to grow which would help maintain Richter to be among the top EMEA companies.


2. Richter's product mix has undergone changes over the years with the gynaecology division contributing around one third to total sales primarily driven by Oral Contraceptives. “Given the untapped potential in Russian and EE markets and high entry barrier, we believe Richter is in a favourable position to leverage its strengths in the EMEA space," CS said.


3. Richter has a strong geographical footprint in the EMEA space. Despite the general slowdown in these markets, the company has managed to retain and in certain cases enhance its market share. Going forward, CS does not expect Richter to concede ground.

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