TA Research said it is mildly positive on the contract extension for the pharmaceutical company.
PETALING JAYA: A contract that was renewed by the government and accepted by Duopharma Biotech Bhd
is expected to contribute to about a quarter of the company’s revenue in the financial year 2023.
In a report yesterday, TA Research said it is mildly positive on the contract extension for the pharmaceutical company.
The contract extends until June 30, 2023 for the company to supply pharmaceutical products and non-pharmaceutical products to hospitals, clinics and others under the government’s Approved Product Purchase List (APPL).
“Thereafter, we believe that the government may possibly extend the current tender by another six months, as the government would usually start the tender process about six to nine months prior to its expiry,” it said.
It also highlighted the potential effects of the strengthening ringgit on Duopharma’s business.
“Our sensitivity analysis suggests that every 1% strengthening and weakening of the US dollar against the ringgit will dilute and lift Duopharma’s 2023’s earnings by a circa 1% to 2%,” TA Research said.
“Note that when Duopharma last tendered back in 2017 for the APPL business, the exchange rate was at around RM4.20 to RM4.25 per dollar,” it added.
The research house said it expects the dollar to weaken against the ringgit slightly to RM4.35 per dollar this year.
TA Research maintained its “sell” call and target price for Duopharma at RM1.43 per share, based on a price-to-earnings ratio of 16-times 2023’s earnings per share.
Duopharma’s net profit for the third quarter ended Sept 30 (3Q22) slid 3.6% year-on-year (y-o-y) to RM16.3mil while cumulatively for the first nine months of 2022, net profit has risen 5.6% y-o-y to RM53mil.
Revenue for the quarter was up 3% y-o-y to RM177mil, which took Duopharma’s cumulative turnover for the three quarters to RM545mil, or 9.3% y-o-y growth.
Likewise, earnings per share dropped 4.4% y-o-y for 3Q22 but rose 5.3% y-o-y for the first nine months of 2022 to 5.59 sen.
In an earlier report, CGS-CIMB Research said Duopharma’s 4Q22 revenue may be supported by private ethical and consumer healthcare (CHC) sales and exports.
It noted that Duopharma’s CHC sales going into the 4Q22 remained stable or higher quarter-on-quarter, as advertising and promotion campaigns have been back-loaded to the final quarter.
