PETALING JAYA: UMediC Group Bhd
’s (UMC) prospects are expected to improve in the second half (2H) of its financial year ending July 31, 2025 (FY25) and beyond, driven by a recovery in sales volume for respiratory products in its manufacturing segment.
This recovery is expected to be supported by global healthcare megatrends, particularly the expanding aging population, which is set to drive sustained demand.
According to Hong Leong Investment Bank (HLIB) Research, UMC’s marketing and distribution segment is projected to achieve steady growth with a three-year compound annual growth rate (CAGR) of 8%. This will be largely fuelled by higher expenditure on medical and laboratory devices as well as consumables from both public and private sectors.
UMC posted a core profit after tax and minority interest (PATMI) of RM2.1mil in the second quarter of FY25 (2Q25), reflecting a 39.9% quarter-on-quarter (q-o-q) increase but a 26.2% year-on-year (y-o-y) decline. For 1H25, cumulative core PATMI stood at RM3.6mil, down 22.8% y-o-y.
“This came in below our (34%) and consensus’ (33%) full year estimates. The negative deviation was mainly due to lower-than-expected revenue at its manufacturing segment,” HLIB Research noted.
Consequently, the research house revised its FY25-FY27 profit forecasts downward by 25%, 39%, and 37% respectively to account for reduced sales volume assumptions.
Despite the earnings downgrade, HLIB Research maintained its positive outlook on UMC, citing favourable risk-reward dynamics.
“Despite downward earnings revision, we still find its risk reward profile skewed to the upside, especially after the recent sharp share price correction (-19% since mid-February),” it said.
HLIB Research maintained its “buy” call on the stock, albeit with a lower target price of 69 sen, compared with 88 sen previously, pegged to a price-to-earnings (P/E) multiple of 26.5 times against its calendar year 2026 earnings per share (EPS) forecast of 2.6 sen.
UMC’s revenue in 2Q25 fell by 14.1% as growth in the distribution segment (+4.5%) was offset by a significant 48.2% decline in its manufacturing segment.
The weaker manufacturing performance was attributed to softer demand for respiratory-related products.
On a half-year basis, revenue contracted by 12%, with the distribution segment down 6.8% and the manufacturing segment sliding 22.8%. The core PATMI decline of 22.8% for 1H25 was primarily due to a lower pre-tax profit margin in the manufacturing segment, which dropped to 23% from 34% previously.
Similarly, the distribution segment's pre-tax profit margin fell to 19% from 21%, which HLIB Research attributed to "possibly less favourable product mix”.
UMC's results for 1H25 also excluded one-off gains, mainly distribution income from a short-term fund amounting to RM131,000.
HLIB Research said the anticipated rebound in respiratory product sales, combined with steady growth in the distribution segment, would support UMC's recovery efforts despite recent earnings pressure.
