Cairo - Mubasher: Pharos research has assigned Cairo Pharmaceuticals Company (CPCI) an Overweight recommendation with a fair value (FV) of EGP 36.16.
The company’s stock is trading at much cheaper than its peer group average, Pharos said in a recent report.
Cairo Pharmaceuticals benefit from the recent rise in drug prices, which will be a driver to revenue growth on the short term as 19 of the company’s products are among those affected by the price hikes.
“Inelastic Nature of Demand minimizes possibility of drop in volumes, hence sustaining revenue growth; especially when coupled with local market supply shortages, maintaining resilient margins,” the research firm explained.
The ministry of health (MoH) has issued a decree regarding medicine price increases effective 12 January 2017.
Per the pricing schedule, 15% of local drugs will increase by 50% for drugs under EGP 50, 40% for drugs under EGP 100, and 30% for drugs above EGP 100.
Moreover, 20% of imported drugs will increase by 50% for drugs under EGP 50, and 40% for drugs above EGP 50.
The company targets increase in capital expenditure investments in fiscal years 2016-2017 and 2017-2018 to improve business lines and grow capacity. It also seeks a higher export focus, to capitalize on EGP flotation, the report noted.
