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Broker views: Pharma and supermarkets

02 August 2017 14:59

Morgan Stanley has moderated it recommendation on pharmaceuticals group Hikma (LON:HIK) and moved to an equal weight position (from overweight), which it said was primarily due to the lack of visibility in Generics and increasing competition in Injectables.

While the City heavyweight concedes that the valuation is undemanding, its sees no reason to buy the shares now.

"We don't see valuation as particularly demanding, but given the business and earnings risks, we would caution against viewing Hikma purely in terms of current multiples," analyst Patrick Chen explained.

Morgan Stanley's price target has been cut to £16 per share from £20.50.

Meanwhile, equity research analysts at HSBC have upgraded their investment rating on supermarket chain Morrisons (LON:MRW) to hold (from reduce) after the Company confirmed that it has won the McColl's wholesale contract adding around £1bn annualised sales to group revenues over time.

The bank said: "The roll out of the McColl's deal starts in January 2018 and we estimate the annualised exit rate will be cGBP0.7bn sales in January 2019, rising to GBP1bn or more by the following January.

"As a result we upgrade FY19E EPS by 1% but for FY20E we upgrade EPS by 5%."

HSBC increased its target price to 240 pence per share (from 190 pence), implying a moderate 0.2% potential downside at current levels.

At 2:59pm:

(LON:HIK) Hikma Pharmaceuticals PLC share price was -14.5p at 1415.5p

(LON:MRW) Morrison Wm Supermarkets PLC share price was +2.3p at 245p

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