DUOPHARMA Biotech Bhd is expected to get a lift moving forward with demand from the private ethical healthcare sector poised to recover in FY2021F in line with an anticipated recovery in patient visitations to hospitals following a deferment of non-chronic procedures during most part of FY2020.
Similarly, demand from the public sector should also remain stable as the contract period for the supply of pharmaceutical and non-pharmaceutical products to government health facilities remains ongoing until Dec 31 next year, according to CGS-CIMB Research.
“This is despite our expectation of a seasonally-weaker 4Q FY2200 due to slower public and private ethical healthcare sales towards year-end,” wrote analyst Syazwan Aiman Sobri in a results review.
Duopharma’s 9M FY2020 sales were flattish at -0.7% year-on-year (yoy) at RM435.82 mil (9M FY2019: RM438.71 mil) as growth in its consumer healthcare segment was offset by weak demand from the private ethical healthcare segment.
According to CGS-CIMB Research, Duopharma’s 9M FY2020 core net profit came in at RM54.7 mil (+7.0% yoy) after excluding one-offs including inventory write-offs (RM9.2 mil in 9M FY2020) and foreign exchange losses (RM2.5 mil in 9M FY2020) mainly arising from its US$-denominated loans.
All-in, CGS-CIMB Research reiterated its “reduce” call on Duopharma mainly on valuation grounds but raised its target price to RM2.50 from RM2.15 previously.
“While we think Duopharma should play a key role in the fill-and-finish process for the potential COVID-19 vaccine (expected to be procured as early as 1H FY2021F), we think the current share price outperformance is running ahead of fundamentals,” justified the research house.
Meanwhile, TA Securities Research also maintained its “sell” rating on Doupharma due to its pricey valuations while an ensuing earnings revision resulted in the company’s target price being lowered to RM1.92 (from RM1.97 previously).
“Demand for pharmaceuticals is expected to remain stable going into 4Q CY2020,” envisaged analyst Tan Kong Jin. “The higher budget allocation given to the Health Ministry (MOH) would bode well for the group as circa 50% of its sales come from the public sector.”
Moreover, the management is still in talks with the MOH for a one-year extension for its human insulin contract (circa RM91 mil/annum) which will expire on Dec 31 this year.
“Meanwhile, Duopharma has begun manufacturing its first product, Letrozole (oncology product) in its HAPI plant to both the private market and for government tender,” added Tan.
At 10.17am, Duopharma was down 5 sen or 1.24% at RM3.99 with 1.33 million shares traded, thus valuing the company at RM2.78 bil. – Nov 13, 2020
