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Research houses positive on Pharmaniaga despite lowering target price

23/05/2022 12:31 PM

KUALA LUMPUR, May 23 (Bernama) -- Research houses have remained positive on Pharmaniaga but revised downward their target price (TP) following the pharmaceutical company’s announcement of its results for the first quarter ended March 31, 2022 (Q1 FY2022).

Pharmaniaga posted a 20 per cent higher net profit of RM27.73 million for the quarter compared to RM23.14 million a year ago, while its revenue improved 21 per cent to RM962.17 million from RM793.50 million.

MIDF Research maintained a “buy” stance on Pharmaniaga with a revised TP of 91 sen per share (previously RM1.03) and opined that the company would continue to remain buoyant in the coming quarters on the strength of its continuous strategic partnership with the Ministry of Health (MOH), the private sector and international healthcare fronts.

“Coupled with its robust portfolio on pharmaceutical products and expanded distribution networks, we continue to view on the group positively.

“However, risks to the group’s operations remain to be the market’s sentiments on the uncertainty of the pandemic’s spread and mutation after Omicron, the ongoing Russia-Ukraine conflict, the increasing inflation pressure, and the continuous supply chain disruption,” the research house said in a note today.

Meanwhile, CGS-CIMB reiterated its “add” call on the stock, albeit with a lower TP per share of 79 sen (previously 90 sen), as it saw positive long-term outlook for the company despite missing the forecast Q1 2022 results due to weak filled-and-finished vaccine sales.

The brokerage said Pharmaniaga was expected to see a tapering of its manufacturing and logistics and distribution (L&D) revenues towards the end of FY2022 due to lower Sinovac COVID-19 vaccines (SV) contribution and seasonally lower concession orders, respectively.

However, CGS-CIMB said longer term prospects were promising supported by a 10-year extension of its concession agreement to be finalised by the third quarter (Q3), as well as its plans to set up a halal vaccine manufacturing facility by end-2024 plus a fill-and-finish facility for recombinant human insulin products/analogues by 2025.

Meanwhile, Kenanga Research maintained its “market perform” stance on Pharmaniaga but lowered its TP to 71 sen (77 sen previously) due to negative earnings growth forecast.

While it raised its FY2022 net profit estimate by nine per cent due to the better-than-expected Q1 results, the research house left its FY2023 earnings forecast unchanged.

“Despite recording bumper profits in FY2021, we do not expect FY2022 to chalk up positive net profit growth going forward since most of the vaccines delivery has been completed.

“Leveraging on the experience and expertise in manufacturing fill-and-finish of the SV, the group intends to export the vaccine to countries such as Indonesia, the Philippines, Cambodia, Thailand and several African nations, that are facing vaccine supply shortages.

“Pharmaniaga is actively negotiating with Sinovac Biotech Ltd to secure a deal to allow the group to speed up the supply of vaccines to these countries. It is also in the midst of finalising the logistics and distribution contract extension agreement with the MOH, slated to be completed by Q3 2022,” Kenanga noted.

 Going forward, the research house said the group was strengthening its business footprint in Indonesia which had a huge untapped potential.

“In Indonesia, the company has successfully staged a swift turnaround, highlighting the effectiveness of the reorganisation of the Indonesian business to enhance its operational efficiency through an ongoing stock optimisation exercise and aggressive payment collection,” it added.

At 12.13 pm, Pharmaniaga eased half-a-sen to 71.5 sen, with 1.41 million shares traded during the day.


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