HLIB Research said UMediC’s marketing and distribution segment is projected to achieve steady growth.
PETALING JAYA: Medical goods supplier UMediC Group Bhd
’s prospects are expected to improve in the second half (2H25) of its financial year ending July 31, 2025 (FY25) and beyond, driven by a recovery in sales volume of the respiratory products from its manufacturing segment.
The recovery is expected to be supported by overarching healthcare trends, particularly the ageing of populations around the world, which is set to drive sustained demand.
According to Hong Leong Investment Bank Research (HLIB Research), UMediC’s marketing and distribution segment is projected to achieve steady growth with a three-year compounded annual growth rate of 8%.
This will be largely fuelled by higher expenditure on medical and laboratory devices as well as consumables from the public and private sectors.
UMediC posted a core profit after tax and minority interests (Patami) of RM2.1mil in the second quarter of its FY25 (2Q25), reflecting a 39.9% quarter-on-quarter increase but a 26.2% year-on-year (y-o-y) decline.
For 1H25, cumulative core Patami stood at RM3.6mil, down 22.8% y-o-y.
“This came in below our estimate (34%) and consensus estimates (33%) for its full year.
“The negative deviation was mainly due to lower-than-expected revenue at its manufacturing segment,” HLIB Research said.
Consequently, the research house revised its FY25 to FY27 profit forecasts for UMediC 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 UMediC, citing favourable risk-reward dynamics.
“Despite the downward earnings revisions, we still find UMediC’s risk-reward profile skewed to the upside, especially after the recent sharp share price correction downwards 19% since mid-February,” it said.
HLIB Research maintained its “buy” call on the stock, albeit with a lower target price of 69 sen per share, compared with 88 sen previously, pegged to a price-earnings multiple of 26.5 times against its calendar year 2026 earnings per share forecast of 2.6 sen.
UMediCs revenue in 2Q25 fell by 14.1% as the 4.5% growth in its distribution segment 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%.
Core Patami 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”.
UMediC’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 the sales of respiratory product, combined with steady growth in the company’s distribution segment, would support UMediC’s recovery efforts despite recent earnings pressure.
