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EFG-Hermes reiterates Buy rating for EIPICO

EFG-Hermes reiterates Buy rating for EIPICO
EIPICO
PHAR
-2.36% 46.00 -1.11
EFG-Hermes issued a report Sunday on Egyptian International Pharmaceutical Industries Co. (EIPICO), maintaining its Buy recommendation on the stock.
“EIPICO reported 4Q2013 net profit of EGP87.6 million, up an impressive 39% Y-o-Y and 36% Q-o-Q. Earnings were 31% north ahead of our forecast on significant EBITDA margin expansion and better non-operating items,” said EFG, “We had been looking for single-digit earnings growth, having assumed high raw material prices would pressure Y-o-Y margins
and partly offset top-line growth.”
EFG said it continues to favour EIPICO as a good play on potential growth in healthcare spending in Egypt, as the company that is well positioned to capitalise on market supply shortage given its ample capacity post the rollover of its new plant in early 2013. Revenue wascame in broadly in line with our forecast at EGP340 million (+12% Y-o-Y, -4% versus forecast), albeit with better-than-expected contribution from export sales. Exports accounted for 22% of total sales (versus 18% in 4Q2012), the highest level since 2009, in line with management strategy to increase focus on higher- margin exports. EBITDA margin came in at 42.5% (+4.8 pp Y-o-Y and 6.1 pp ahead of our forecast), on higher contribution from exports and better efficiencies from the new plant, in our view. The board of directors has proposed a cash dividend of EGP3.00 per shares (the ex-date is yet to be announced), in line with EFG’s forecast and 2012’s DPS. This implies a payout ratio of 79% and dividend yield of 6.3%. Full-year 2013 earnings came in at EGP330 million, growing c3% Y-o-Y (+7% versus forecast) post two years of declines on margin pressure from rising labour costs and raw material prices. EFG expects EIPICO’s solid growth prospects, above peers’ margins and healthy balance sheet to sustain earnings growth over the short-to-medium term, triggered by top-line growth and margin expansion.