Broker snap: Reckitt Benckiser is undervalued by market, says Citigroup

17th Jun 2013 09:11

Shares in consumer products giant Reckitt Benckiser were making gains on Monday morning after Citigroup reiterated its 'buy' rating and 5,450p target price, saying that the stock is undervalued."We are buyers of Reckitt for the recovery of its core business and for its potential in Consumer Health," the broker said in a research note."However, we also think Reckitt Benckiser Pharmaceuticals (RBP) is undervalued by the market, particularly in light of its early resilience to the recent entry of generic competition in the US Suboxone market."Despite generic versions of Suboxone (used to treat opioid dependence) being launched at the end of February, RBP film market share has held up well, the broker said. However, it estimates that film loses 20% of its current share to generic and branded competitors over the next two years.Nevertheless, Citi said it valued RBP at £5.2bn, or 710p a share, yet the current share price of 4,589 (by Friday's close) implies a mere £2.0bn valuation, equal to 275p a share. The broker said that this is "too conservative".The stock was up 2.36% at 4,687p by 10:55.