Broker snap: Credit Suisse cuts Reckitt Benckiser

2nd Feb 2010 09:51

Credit Suisse has cooled on the appeal of Anglo-Dutch company Reckitt Benckiser, reckoning that the next few months will be challenging for household good makers.'Reckitt's growth prospects may be lower by its own high standards, but should still be better than its immediate peers. It would surely be rather premature to say Reckitt has lost its touch that has helped it consistently outperform these peers (and indeed the stock market),' Credit Suiise concedes.'That said the growth in the core (i.e. excluding Suboxone in the US) is slowing, and in household alone (excluding OTC [over the counter]) has all but stopped - a combination of very sluggish markets, the reluctance of consumers to trade up and increased competition,' the Swiss bank adds.Credit Suisse (CS) thinks that it is only matter of time before Reckitt's treatment for opiate addiction, Suboxone, faces competition from a generic version. 'We think there will be a number of generic Subutex launches and with prices likely to collapse there will be switching from Suboxone to Subutex. Subutex has already lost 60% of its business to the single generic launch inside 3 months,' CS notes.The bank has downgraded the stock from 'outperform' to 'neutral'. 'For the moment the more discretionary HPC [household products] sector looks the most expensive consumer staples group to us. Though Reckitt may be the best value in this sub-sector, a Neutral rating looks more appropriate for now,' CS concludes.The bank has a price target of £33.50 for Reckitt.