Hikma: Valuation support despite mixed half-year

Deutsche Bank maintained its "Buy" rating on Hikma Pharmaceuticals, trimming its target price to 2,850p from 3,100p, citing compelling valuation despite mixed first-half results. While revenue and core EBIT slightly beat consensus, the key injectables division underperformed, leading to a margin guidance cut partially offset by stronger branded medicines. Deutsche Bank views Hikma's current trading multiple of approximately 10 times forward earnings as a significant discount to European specialty pharma peers, asserting solid fundamentals and US manufacturing strength support long-term investment, even with limited immediate catalysts.

Analysis

Deutsche Bank has reiterated its "Buy" rating for Hikma Pharmaceuticals but revised its price target down to 2,850p from 3,100p, citing a compelling valuation despite mixed first-half 2025 results. While headline revenue and core EBIT modestly beat consensus, the key injectables division, which garners the most market focus, underperformed by a mid-single-digit percentage, leading management to cut margin guidance for the unit. This was partly offset by an upgraded outlook for the branded medicines segment. The net impact for Deutsche Bank is a low-single-digit reduction in its full-year core EBIT forecast. The core of the bank's thesis is valuation: Hikma trades at approximately 10 times forward earnings, a significant discount to European specialty pharma peers trading above 15 times. This valuation gap, combined with solid fundamentals, a tariff-shielding US manufacturing footprint, and relatively high-margin products, underpins the positive long-term view, even as the bank acknowledges a scarcity of immediate share price catalysts.

Key Decisions for Investors

• Value-oriented investors with a longer-term horizon could consider the current share price an attractive entry point, given the stock is trading at a significant valuation discount of approximately 10 times forward earnings compared to peers at over 15 times.
• Investors should closely monitor the performance and margin recovery of the injectables division, as its recent underperformance and guidance cut represent the primary headwind and risk to the investment case.
• Given the noted lack of immediate catalysts, investors should be prepared for potential share price stagnation and must be willing to hold the position until a new growth driver emerges.