PETALING JAYA: Despite a strong first half, many are expecting the second half of 2026 (2H26) to taper down for Duopharma Biotech Bhd
.
For the second quarter ended June 30, 2026, the pharmaceutical group posted a net profit of RM29.9mil, bringing its 1H26 earnings to RM60.6mil.
According to UOB Kay Hian (UOBKH) Research, earnings accounted for 59% of both its and consensus’ full-year forecasts.
As the strong yearly earnings growth was supported by a year-to-date reversal of inventory impairment of RM420,000, inventory impairment charges could normalise.
The research house explained that this could temper earnings growth in 2H26, also because the fourth quarter is usually the weakest for earnings.
As for its sales on a yearly basis, the group registered a 5.7% hike as export sales increased 18% year-on-year.
Local sales grew 4.8%, driven by private market sales.
UOBKH Research said, in response to geopolitical uncertainties, Duopharma has proactively increased inventory buffers by lifting finished goods to four to six months of inventory.
“It is also targeting up to eight months, from six months of active pharmaceutical ingredients (API), for key stock keeping units.
“The focus is on high-volume and essential medicines, securing supply ahead of further disruptions.
“This extended inventory coverage provides a meaningful buffer, offering resilience against potential supply disruptions going forward,” the research firm said.
It also noted that the group’s exposure to the US dollar remained unhedged this year.
“Net of its export sales as a natural hedge, the company’s 2027 earnings sensitivity to US dollar to ringgit is 0.3% for every 1% depreciation in the dollar, based on our assumption that Duopharma leaves its exposure unhedged for 2027,” the research firm added.
“We have assumed a foreign- exchange assumption of RM4 for every US dollar for 2027,” the research house noted.
With that, UOBKH Research said it will maintain a “buy” call on the stock with an unchanged target price of RM1.62, with its price-to-earnings ratio (PE) peg of 14.4 times based on Duopharma’s five-year average mean PE.
Similarly, RHB Research also expects 2H26 to normalise for the group, due to seasonality and the absence of the three months insulin supply contract.
In a report, the research house said 1H26 already accounts for 62% of its and 60% of consensus’ full- year estimates.
The research house further pointed out that the decline in local sales was in line with the Health Ministry’s procurement cycle, where the first quarter typically sees stronger government orders following the cessation of fourth quarter orders.
However, the approved products purchase list contract has been extended for another six months to June 2027 – so prices for these will be unchanged over the next six months.
“This could pose a margin risk from FY27. We believe flexible pricing in the private sector could partly offset the impact.
“Other headwinds include a weaker ringgit and rising active API costs, which should eventually feed through once the current lower-cost API inventory is depleted.”
RHB Research said it will keep a “buy” call on the stock with a higher TP of RM1.57 from RM1.56 previously.
