KUALA LUMPUR: Duopharma Biotech Bhd
’s dominant market position in the local generic drug manufacturing means it is well placed to capitalise on any rise in out-of-pocket health expenditure at the pharmacies.
According to Kenanga Research, its contracts that were secured from the government last year have improved margins.
This pertains to the renewal of the government’s Approved Products Purchase List (APPL) with new contracts that were awarded in April 2024 and they are worth a total estimated value of RM666mil.
It will see the company supplying to 86 pharmaceutical and non-pharmaceutical products to public hospitals and clinics under the APPL until Dec 31, 2026.
These contracts have an in-built US dollar foreign exchange rate assumption of RM4.70 per dollar compared to the RM4.20 to RM4.25 range in 2017, said Kenanga.
“The APPL will anchor earnings in the financial year 2025 (FY25) and FY26. We believe the new rates allow some cost pass-through,” the research house said.
The company was also separately awarded additional contracts amounting to RM88mil for the supply of pharmaceutical products to government hospitals and clinics.
Kenanga Research had initiated coverage on Duopharma with an “outperform” rating and a target price of RM1.50.
This, it said, is based on 15 times FY26 forecast earnings per share, which is a 15% to its peers’ average due to its dominant market position in the local generic drug manufacturing and bigger market capitalisation.
“We expect government spending on healthcare to increase with an ageing population, longer life expectancy and to provide better healthcare facilities and services.
“We think this should provide Duopharma a strong platform to grow its local public sector revenue,” it said.
