(Updates with takeover plan, quote, details)
By Marja Novak
LJUBLJANA, July 6 (Reuters) - Slovenian generic drugs producer Krka said it was in talks to buy a small Chinese pharmaceutical company as it announced a 31 percent rise in first-half profit on Thursday.
Krka, which is Slovenia's largest listed company, has set a target to increase the volume of its sales by at least 5 percent annually on average in the years to 2020.
It did not disclose the name of its acquisition target but said it hoped to acquire at least a 51 percent stake in the Chinese company which has sales of less than 10 million euros ($11 million) a year.
"Due diligence is in the final stages and final talks will take place in July. If they will be successful the transaction will be completed by the end of summer," Krka said, adding it will focus on other takeover targets if talks fail.
Krka reported a net profit of 91.7 million euros for the first half of the year, according to an initial estimate with final figures due to be released on July 27.
It said sales rose by 8.5 percent to 655 million euros with sales in Eastern Europe, Krka's largest market, up by 22 percent. ($1 = 0.8782 euros) (Reporting By Marja Novak; Editing by Keith Weir and Susan Fenton)