Animal health company Huvepharma has significantly grown in size and gained market share, while improving its profitability. Nevertheless, free operating cash flow will face pressure due to large investments. We estimate that the company should achieve EBITDA growth of at least 10% over the 12 months ending June 2018, corresponding to a margin exceeding 25%, which compares favorably even with larger peers. We are therefore revising our outlook on Huvepharma to positive from stable and affirming our 'BB' long-term rating. We could raise the rating over the coming 18-24 months if Huvepharma continues to deliver strong earnings growth that allow it to execute its investments in new capacity, which in the longer term should enable the company to become a
