PETALING JAYA: Kenanga Research says Nova Wellness Group Bhd
’s slower-than-expected production ramp up at its new plant will likely drag top line contribution and impact margins due to weaker-than-anticipated economies of scale.
As such, the research house is cutting its financial year 2025 (FY25) and FY26 net profit by 21% and 31% respectively and reducing its target price by 20% to RM0.41, from RM0.51.
The research house has downgraded the stock from “outperform” to “market perform”.
Its first half 2025 net profit of RM3.7mil came in below Kenanga Research’s expectations at 31% each of its and consensus full-year net profit forecasts.
The variance against its forecast came largely from weaker-than-expected sales, as consumers temporarily held back purchases amid weak spending sentiment and lower-than-expected margins
No dividend was declared in this quarter which was in line with expectations.
The research house, however, continues to like Nova for various reasons.
These include its integrated business model which encompasses the entire spectrum of pharmaceutical value chain from product conceptualisation, research and development to manufacturing and sales, superior margins due to its original business manufacturing model.
There will be earnings growth driven by capacity expansion, a widening distribution network and penetration into local public hospitals.
Risks to its call include intense competition from existing and new, as well as local and foreign players, and product safety and regulatory risks.
