In addition to the lower margins contract, CGS-CIMB Research believes there is a potential of cost pressures, brought on by high raw material prices and inflationary pressures, that might further pressure Duopharma’s margins.
PETALING JAYA: Duopharma Biotech Bhd
’s margins could be affected moving into the second half of this year (2H22) owing to government’s high revenue contract that comes with lower margins.
In addition to the lower margins contract, CGS-CIMB Research believes there is a potential of cost pressures, brought on by high raw material prices and inflationary pressures, that might further pressure Duopharma’s margins.
UOB Kay Hian (UOBKH) Research said Duopharma’s margins should taper off in tandem with its Sinopharm vaccine sales as the government imposed ceiling price is close to Duopharma’s cost price for the vaccine. The pharma company also has to contend with lower-than-usual margins from government’s contracts.
TA Research believes Duopharma’s future margins may be affected if the government decides to roll-over existing approved product purchase list (APPL) contracts that expire at the end of this year.
Duopharma’s APPL contracts are due for retender as existing contracts expire on December 2022.
However, going into the second half of the year, TA Research expects Duopharma’s sales to remain resilient due to the higher budget allocated to the healthcare industry as well as reopening of international borders.
The brokerage noted Duopharma may enjoy potential tax savings of more than RM10mil over the next few years, upon the completion of its new plant this year.
As the pharma company is looking out for potential mergers and acquisitions (M&A) opportunities within the Asean market, TA Research said this would help Duopharma raise exports contribution and thus diversify earning risks.
“We are positive on the news as the potential merger and acquisitions could fuel Duopharma’s future earnings growth,” TA Research said in a report on the pharma company yesterday.
Despite that, TA Research reduced its target price (TP) on Duopharma to RM1.41 per share, from RM1.49 previously.
The research house also downgraded the counter to a “hold” call from “buy” with no changes to earnings estimates.
CGS-CIMB Research has upgraded its call on Duopharma from a “hold” to “buy” and raised its TP by 10 sen to RM1.70 per share, noting the downside risks include weak pharmaceutical sales and higher-than-expected input costs.
UOBKH Research maintained its “buy” call on Duopharma with a higher TP of RM2.05 per share, from RM1.80 previously.
“While sentiment over Duopharma’s vaccine beneficiary role has swung back and forth, its primary operations have chugged along quietly, but masterly,” UOBKH Research said in the report.
“We expect Duopharma to gradually re-rate and appreciate for its consistent execution once vaccine-related expectations, noise and sentiment diminishes,” UOBKH Research added.
