Zentiva reported solid 1H2005 results in line with our expectations but slightly below market forecasts. We see the results as encouraging, proving Zentiva’s strong focus on efficiency and high margins products. The company reiterated its FY2005 targets, which are in line with or slightly above our expectations. Based on the 1H2005 results we will review our forecasts, but as the numbers were mostly in line we do not expect significant revisions. We believe that there is limited scope for Zentiva to surprise the market as regards its earnings and therefore we are looking for some catalyst, e.g. acquisition / change in dividend policy to cause its shares to shift. We also highlight that the lockup period for Warburg Pincus and Zentiva’s management ends at the beginning of September. For the moment we keep our fair value unchanged at CZK 904 with a Hold recommendation.
IFRS Consolidated (CZK m) 1H05A 1H2004 % change 1h2005 Patria Consensus
Sales 5,478 5,188 5.6% 5,492 5,630
Gross Profit 3,545 3,271 8.4% 3,534 -
EBIT 1,358 1,311 3.6% 1,375 1,470
Pre-tax income 1,394 1,209 15.3% 1,374 -
Net income 988 753 31.2% 960 1,030
EPS (CZK, annualized) 51.8 39.5 31.1% 50.4 54