Deutsche Bank has raised its price target for Hikma Pharmaceuticals (LSE:HIK, OTC:HKMPF) to 2,050p from 1,950p, reiterating its buy rating on the FTSE 100 drugmaker.
The upgrade follows a strong set of half-year results from the London-listed pharmaceuticals group, which surpassed market expectations at the interim stage.
Analyst Kane Slutzkin said Hikma delivered a substantial beat at the half-year stage, driven primarily by the branded division, yet left full-year guidance largely unchanged.
That decision to hold guidance steady has raised an immediate question among investors about whether management is simply being conservative with its full-year outlook.
Slutzkin argued the strength of the first half materially lowers the execution hurdle required to hit the midpoint of guidance, while leaving management flexibility in the second half as it rebuilds credibility around its forecasting.
Deutsche Bank now assumes full-year core operating profit lands at the midpoint of guidance, a figure the bank continues to regard as cautious given the first-half performance.
That assumption drives a 4% upgrade to Deutsche Bank’s earnings-per-share estimate for the current financial year, reflecting the improved profit trajectory across the business.
The higher price target also reflects a richer multiple applied to the branded business within Deutsche Bank’s sum-of-the-parts model, which values each division separately before adding them together.
Valuation remains the central pillar of the investment case, with Hikma’s stock trading on roughly 10 times earnings, a level the bank considers attractive relative to the company’s underlying fundamentals.
Slutzkin described that as very compelling for a company that appears to be steadily restoring confidence in its numbers, suggesting the market has yet to fully price in the improving outlook.
The broker’s constructive stance comes as Hikma works to strengthen investor trust following a period in which forecasting reliability had come under scrutiny.
A sum-of-the-parts valuation approach allows Deutsche Bank to reflect the distinct growth profiles of Hikma’s branded, generics, and injectables divisions within a single consolidated view.
Despite the upgraded target, the shares were off 1.4% at 1,654p in afternoon trading, leaving considerable headroom between the current price and Deutsche Bank’s revised valuation.