STOCKWATCH - Erste Keeps Slovenian Drug Maker Krka at 'Buy', Cuts Target Price

"Our revised DCF (discounted cash flow) -derived 12-month target price arrives at 118.5 euro per share, slightly down from the earlier value of 125 euro per share. As the most liquid among the Ljubljana-listed stocks, Krka suffered during the recent sell-off wave that spilled across equity markets, sending its price to new lows and largely wiping out its premium to its CEE-based rivals,” Erste's equity analyst Vladimira Urbankova said in a report.

Krka’s shares rose 2.14% to an average price of 63.93 euro on the Ljubljana Stock Exchange (LJSE) on Wednesday amid an overall upswing on the market.

Erste said it continues to believe that the company’s steadily high double-digit tempo and very healthy outlook, propelled by its solid regional footing and strong R&D pipeline, along with above-average profitability parameters, warrant more demanding multiples than its regional peers could command.

“All told, we reiterate our Buy recommendation on the stock,” Urbankova said.

Erste said Krka's 2008 interim results reassured investors that, in maintaining a superior growth tempo and profitability, the company is leaving its regional competitors well behind.

The company has reported a 15% annual rise in its first-half group net profit to 78.4 million euro. It raised its group sales by 20% on the year to 469.3 million euro in the first half of 2008.

Erste cut slightly its forecast for Krka’s 2008 net profit target to 163.3 million euro from 167.1 million euro projected earlier. It said its forecast for Krka’s 2008 sales of 950.9 million euro is achievable, having in mind the company’s first-half results.

Krka has said it projects a group net profit of 160 million euro ($215 million) this year on group sales of 950 million euro. It posted a 2007 group net profit of 132.85 million euro on sales of 780.92 million euro.

($ = 0.7845 euro)