Pharmaniaga remains on a healthy trend


Robust portfolio, expended distribution key to growth

PETALING JAYA: Pharmaniaga Bhd will continue to be supported by its long-term partnership in drug supply with the government through the Health Ministry.

The group also has a robust portfolio of pharmaceutical products and expanded distribution networks which it can count on for growth.

According to MIDF Research, the transition to the endemic phase may mean a decreased need for a quick supply of vaccines.

However it also noted that treatments and drugs for other diseases will continue to remain in demand.

The research house anticipates the next demand growth may come from the halal market.

“Halal pharmaceuticals are pivotal to countries with a higher Islamic population, with demand for halal products continuing to grow at US$2bil (RM8.78bil) or an increase of 3% each year.

“It is also reported that Muslim spending on halal pharmaceuticals globally is set to grow up to US$105bil (RM461bil) by 2024, which would be in line with Pharmaniaga’s targeted commercialisation of its halal products,” MIDF Research said.

“We also believe that the group’s partnership with Malaysia Healthcare Travel Council in the manufacturing and distribution for hepatitis C drugs is a good move, considering that as of 2019, over 400,000 individuals in Malaysia had been infected by hepatitis C, but only 1% were treated, due to high cost and availability of medicines to treat the disease,” it added.

MIDF Research said, however, that Pharmaniaga’s recent first quarter earnings came in below its expectations.

“We revise our earnings forecasts for the financial year 2022 (FY22) and FY23 downward by minus 13% and minus 16% respectively.

“As such, we revise our target price to 91 sen from RM1.03 previously and peg a price- to-earnings ratio of seven times to a revised forecast FY22 earnings per share of 12.8 sen,” it said, still rating the stock a “buy”.

Meanwhile, Hong Leong Investment Bank (HLIB) Research said Pharmaniaga’s most recent reported quarter’s core net profit of RM31mil which rose 17% year-on-year had beat both its and consensus projections at 39% and 28% respectively.

“The discrepancies in our projection were due to higher-than-expected revenue. First quarter core net profit was arrived at after adjusting for extraordinary items which amounted to RM3.3mil,” HLIB Research said.

The research house also raised its earnings forecasts on Pharmaniaga for FY22-FY23 by 3%-16%, to reflect the stronger-than-expected results that was delivered in the quarter.

HLIB Research had also introduced its forecast FY24 earnings of RM88mil.

It had also lowered its price-to-earnings multiples valuation on Pharmaniaga to 11.6 times which is a plus 0.5 standard deviation of its five-year mean based on its forecast FY22 earnings per share of 7.1 sen.

The lower ascribed valuation is premised upon the assumption that the endemic phase would not require the company to supply a large amount of Covid-19 vaccines in one go.

It also lowered its target price to 83 sen from RM1.13 and maintained its “buy” call on the counter.

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