KUALA LUMPUR: Duopharma Biotech Bhd
's prospects are expected to remain bright following a strong performance in the first quarter of 2023, as resilient patient footfall in the public and private hospital segments drove higher prescription pharmaceutical product sales.
In a company update, investment research firm RHB Research said Duopharma made a strong start to its financial year by booking a first quarter core profit of RM28.3mil, which made up 30% and 29% of its and consensus full-year expectations.
"We deem the results as above expectations, aided by the 16% year-on-year (y-o-y) export sales pick-up (+45% quarter-on-quarter) that benefited from reopening international borders," said the research house.
It said the local sales segment, which recorded 6% y-o-y growth, was likely driven by sustained drugs procurement demand from the public and private sectors.
Duopharma also maintained a 1Q23 gross profit margin of 41.2%, which was 0.4 percentage points higher from 40.2% in 1Q23.
RHB said this was likely owing to a better product mix from gradual improvements in private sales over public ones, and time average selling price adjustments to counter the impact of a weakening ringgit against the US dollar.
The group's 1Q23 earnings before interest, taxes, depreciation and amortisation (Ebitda) was largely stable at 19.6%, it said.
RHB said it kept to a positive outlook on the pharmaceutical group in anticipation that earnings will be supported by robust drug procurement, in-elastic consumer demand towards healthcare products, and potential synergies generated from its investee companies.
It maintained its "buy" call and target price of RM1.75 on the share as it left its earnings estimates unchanged pending updates from an upcoming analysts' briefing.
"The stock currently trades at a 12-month forward price-earnings of 14x, 0.6SD below its 5-year mean of 17x.
"We deem this as unjustified, given DBB’s better than peers’ margins profile, long-term growth potential from its investment in higher-value products (eg oncology), and synergies generated from its investee companies," said RHB.
It noted also that key risks to the outlook include lower-than-expected volumes sold and a depreciation of the ringgit against the US dollar.
