UNLIKE its industry peers, Pharmaniaga Bhd probably has one envious advantage as observed by CGS-CMB Research – despite weakness in demand from the private sector, its sales to the public sector have remained steady amid persistently high COVID-19 cases.
Aside from its vaccine supply agreement, the research house gathered that Pharmaniaga’s sales to the public sector under both its concession and non-concession business have remained resilient due to high demand from public hospitals.
“Lingering concerns over the outbreak have led to higher demand for immunity boosting products in its consumer segment although we estimate that its consumer segment is a relatively small part of its revenue base at this juncture,” projected analyst Syazwan Aiman Sobri in a company update.
“We think that the weakest segment under current conditions is its private healthcare segment (circa 7% of FY2020 revenue) due to weak private patient visitations.”
On the vaccination front, CGS-CIMB Research said Pharmaniaga is well on track to fulfill its contractual obligation to supply 12 million doses of the Sinovac COVID-19 vaccine to the government by end-July.
Aside from the contractual 12 million doses to the Government, Pharmaniaga will offer the remaining doses to the private sector and state governments to complement the National Immunisation Programme (NIP).
PHRM is also looking to boost its production capacity to 4 million doses a month by seeking approval for a two-dose vial for the Sinovac COVID-19 vaccine from the National Pharmaceutical Regulatory Agency (NPRA).
On July 3, Pharmaniaga announced that it had been appointed by the Health Ministry (MOH) via open tender to manage the logistics and distribution of circa eight million doses of the AstraZeneca COVID-19 vaccine in Malaysia.
“While margins will likely be thinner compared to the fill-and-finish works for the Sinovac COVID-19 vaccine, we think this will offset weakness from other segments affected by the COVID-19 outbreak,” reckoned CGS-CIMB Research.
All-in-all, CGS-CIMB Research reiterated its “add” call on Pharmaniaga with an ex-bonus adjusted target price of RM1.06 post the listing of its four-for-one bonus shares on July 7.
“Our target price is based on an updated 23 times CY2022F PE (price-to-earnings ratio) at an unchanged +1 s.d. (standard deviation) from its five-year mean PE,” justified the research house.
“This is to factor in potentially stronger earnings prospects from the COVID-19 vaccine contribution and longer-term vaccine manufacturing capabilities.”
For now, Pharmaniaga’s potential re-rating catalysts/downside risks include (i) better-/lower-than-expected contribution from its fill-and-finish works for its Sinovac COVID-19 vaccine, and (ii) better-/lower-than-expected concession business margins.
At 10.52am, Pharmaniaga was up 3 sen or 3.31% to 93.5 sen with 5.21 million shares traded, thus valuing the company at RM1.22 bil. – July 9, 2021
