PETALING JAYA: Potential growth from higher-margin products and ongoing cost optimisation initiatives is expected to support stronger earnings momentum for Duopharma Biotech Bhd
moving forward.
Despite that, CGS International (CGSI) Research only slightly raised its forecasts on the company due to elevated distribution and petroleum-based active pharmaceutical ingredient (API) costs from energy disruptions from an extended Strait of Hormuz closure.
Duopharma’s first-quarter of financial year 2026 (1Q26) results appear to have come in ahead of most analysts’ expectations.
“Bottomlines were driven by improved operational efficiencies, lower financing costs and favourable foreign exchange movements despite softer revenue performance,” noted CGSI Research.
Revenues for the quarter saw declines due to normalisation in public sector insulin demand following a one-off surge recorded in the corresponding quarter last year.
CGSI Research said weaker public sector sales were partly cushioned by stronger contributions from the private and export market segments, particularly from consumer healthcare products.
Also, lower operating and finance expenses also contributed to wider margins during the quarter.
The research house highlighted Duopharma’s gross profit (GP) margin improved to about 39.3% in 1Q26, signalling a continued shift towards higher-value products.
CGSI Research said this was evident in the company’s strategy to prioritise margins over market share during recent insulin contract negotiations.
“A higher GP margin indicates a shift towards higher value chain products,” the research house said, adding that management is expected to provide further updates in early June.
Looking ahead, CGSI Research believes Duopharma’s focus on higher-margin offerings and cost optimisation efforts could continue driving earnings expansion.
The research house projected earnings per share growth of 14.8% for financial year 2026 (FY26), followed by annual growth of around 8% for FY27 and FY28.
CGSI Research reiterated its add call on Duopharma and raised its Gordon Growth Model-derived target price to RM1.79 per share.
The research house said the stock’s valuation remains attractive at 11.7 times FY27 price-to-earnings ratio, which is more than one standard deviation below its three-year pre-Covid-19 pandemic historical average after its demerger from Chemical Company of Malaysia Bhd.
Meanwhile, RHB Research expects Duopharma to deliver stronger year-on-year growth in the 2Q26, supported by peak demand from government healthcare contracts and resilient profit margins.
The research house said growth in 2Q26 is likely to be driven by the final year of the Approved Products Purchase List tender cycle for 2024 to 2026, alongside contributions from a sizeable insulin supply contract that was secured earlier this year.
RHB Research noted Duopharma’s RM65.1mil insulin contract awarded on Feb 19 should provide a meaningful boost to second-quarter revenue despite the contract running for only three months until May 15.
“The contract value is comparable to that of a typical six-month contract,” the research house said.
RHB Research expects margins to remain resilient in the near term due to the stronger ringgit against the US dollar and the company’s API inventory buffer of between three and six months.
The inventory stockpile should help cushion the impact of gradually rising API prices.
Following stronger-than-expected recent results, RHB Research adjusted its FY26 to FY28 earnings forecasts by plus 1%, minus 1% and unchanged, respectively, partly reflecting higher operating expenditure assumptions.
RHB Research maintained its buy call but lowered its discounted cash flow-derived target price for Duopharma to RM1.61 per share from previous levels following refreshed valuation assumptions.
