Hikma Pharmaceuticals PLC (LSE:HIK, OTC:HKMPF) shares rose 10% to 1,721p after first-half results came in ahead of expectations on profits, with both Peel Hunt and Stifel keeping buy ratings.
The scale of the beat is the story. Core operating profit rose 8.6% to $405 million, roughly 11% above the $364 million consensus and well ahead of the modest decline both brokers had modelled.
Adjusted earnings per share of 128 cents beat consensus by 14%. Revenue told a quieter tale, up 4.3% to $1.73 billion against a $1.71 billion consensus, a beat of about 1%.
That gap between a small revenue beat and a large profit beat is what has moved the shares.
Both brokers traced most of it to the Injectables division, where revenue of $685 million came in slightly light but the operating margin held at 27.6%, comfortably above the 26.7% consensus expected.
Peel Hunt noted the margin outperformance came despite lower sales, with management flagging a second-half weighting to the division's growth.
Stifel put the standout elsewhere, pointing to Branded, where revenue grew 15% to $502 million and operating profit rose 23% to $163 million.
That took the division's margin to 32.5%, which Stifel called a multi-year high, though the broker cautioned some of it reflected operating costs delayed into the second half.
The two houses report the Branded margin differently, with Peel Hunt putting it at 23%, worth noting when comparing the notes.
Hikma left full-year guidance unchanged at 2% to 4% revenue growth and core operating profit of $720 million to $770 million.
The only change was to Branded, now expected at the top end of its previous 6% to 8% growth range.
Stifel has a 1,700p target price, implying limited upside from the current level, while Peel Hunt sits higher at 1,880p.
Christian Glennie and James Orsborne at Stifel said the results should consolidate a recovery from three-year lows, describing the valuation as attractive and undemanding.
The shares trade on 9.3 times this year's earnings with a 4.2% dividend yield, a persistent discount to UK healthcare peers.
They remain 18% lower over 12 months.
