Stifel has reiterated its 'buy' rating on Hikma Pharmaceuticals PLC (LSE:HIK, OTC:HKMPF), arguing that the shares look compellingly cheap even as debate intensifies over margins in the key Injectables division.
First-half results were broadly in line at group level, but Injectables profitability slipped.
Margins came in at 30%, short of the 33% expected, and management has cut full-year guidance from the “mid-30s” to a 32–33% range. Stifel now pencils in 32.3% for 2025, down from 34% previously.
The story for the second half is about recovery. To hit the new full-year guidance, Injectables margins will need to rebound to around 34% in H2.
Stifel thinks that is achievable thanks to higher-margin product launches, extra contract manufacturing work and, importantly, the anticipated launch of Tyzavan before year-end.
Looking further out, the analysts have trimmed forecasts too, now assuming margins settle in the 32–33% band rather than 33–34%.
That is still shy of consensus at roughly 35%. Geographic mix is part of the problem, with growth skewing towards Europe and the Middle East and North Africa, which tend to be less profitable.
But there are offsetting supports: the Tyzavan rollout, the integration of Xellia products, and a step-change in capacity when the new Bedford facility comes online from 2027 onwards.
Despite the modest downgrade, the financial impact is limited. Stifel’s revenue forecasts rise by 2%, while operating profit and earnings per share dip by just 1%. More importantly, the valuation case looks hard to ignore.
On about 10 times forecast earnings and eight times enterprise value to earnings before interest, tax, depreciation and amortisation (EV/EBITDA), the shares trade at a notable discount to global pharma peers.
The analysts note that their forecasts remain below Hikma’s own three-year growth targets for revenue and operating profit, which suggests room for upside if management delivers.
The shares were up 0.9% at 1,818p.