PETALING JAYA: Duopharma Biotech Bhd
could benefit from higher government medicine procurement following a 2.5% to RM47.7bil increase in the Health Ministry’s allocation under Budget 2027, while cost optimisation efforts are expected to support margins amid rising raw material prices.
According to TA Research, several other Budget 2027 measures that could benefit the pharmaceutical industry include a RM25,000 grant to support halal micro, small and medium enterprises, as well as a provision allowing manufacturers to reclaim sales tax on machinery and raw materials for pharmaceutical products bought from local traders.
The current Approved Products Purchase List (APPL) contract, which expires on June 30, 2027, could also present an opportunity for Duopharma to secure more stock-keeping units.
However, the government may opt to extend the existing APPL contract by another six months, potentially delaying the tender renewal process.
That said, TA Research expects the group’s profit margins to remain resilient, despite cost pressures from the Middle East conflict.
It forecasts Duopharma’s gross profit margin to improve to 41.8% in financial year 2026 (FY26) from 39% in FY25.
Based on channel checks, prices of active pharmaceutical ingredients (APIs), which account for about 55% of the group’s production costs, have risen by approximately 10%.
Nevertheless, TA Research said Duopharma has the flexibility to selectively raise selling prices for private-sector products, although its ability to pass on higher input costs to the government segment remains limited.
“The impact of higher API prices could be mitigated by ongoing cost optimisation efforts and a stronger ringgit,” it added.
On supply, the group has sufficient API stockpiles to meet its requirements until at least the first quarter of FY27. TA Research expects sales in the second half of FY26 (2H26) to be about 8% lower than in 1H26, mainly due to seasonal factors.
“Government drug procurement typically slows towards year-end before picking up again in January, with December usually a quieter period for public-sector medicine spending,” the research house said.
However, contributions from the private-sector and export segments are expected to partially offset weaker government sales.
Duopharma’s export revenue grew 22.3% year-on-year to RM36.2mil in 1H26, driven by stronger demand from the Philippines, Singapore and the Middle East.
TA Research expects this momentum to continue into 2H26, supported by renal and anti-flu respiratory products. It raised its FY26 to FY28 earnings estimates by 0.7% to 5.2%, factoring in better cost optimisation.
It maintained its “buy” recommendation on Duopharma, with a higher target price of RM1.73 from RM1.69 previously, based on 15 times its calendar year 2027 earnings per share and a 3% environmental, social and governance premium.
