CGS-CIMB upgrades Duopharma to ‘add’, keeps target price at RM3.67 on strong 1QFY21 results
KUALA LUMPUR (May 4): CGS-CIMB has upgraded its call on Duopharma Biotech Bhd to “add”, while maintaining its target price (TP) at RM3.67, after the group posted a strong set of results for the first quarter ended March 31, 2021 (1QFY21).
In a note today, CGS-CIMB analyst Syazwan Aiman Sobri said he upgraded the stock’s rating after deeming its current valuations as attractive in light of its recent share price weakness.
“Our TP is based on a FY22 forecast price-earnings ratio (PER) or 28.8 times (plus two standard deviations or +2SD from the five-year mean) where we take into account potential long-term earnings prospects of the development of vaccine manufacturing capabilities, which is a key rerating catalyst,” he said.
He also highlighted that Duopharma also recently proposed a one-for-three bonus issue, which could improve the counter’s liquidity.
Syazwan also opined that the procurement and supply of 6.4 million doses of Russia’s Sputnik V Covid-19 vaccine to the Ministry of Health (MoH) could begin contributing to Duopharma’s earnings as early as 2QFY21.
“Currently, we gather that the execution of this agreement is still pending the approval of the Malaysian Drug Control Authority (DCA) under the National Pharmaceutical Regulatory Agency (NPRA),” he said.
Meanwhile, he noted that the group’s 1QFY21 net profit came in within his expectations as well as the consensus estimate at 22% and 25% of the respective forecasts.
To recap, Duopharma yesterday announced that its net profit grew 29.9% to RM17.61 million, from RM13.56 million a year earlier, on the back of higher sales in the consumer healthcare sector. Earnings per share (EPS) increased to 2.49 sen from 1.98 sen.
Quarterly revenue rose 4.9% to RM166.45 million from RM158.71 million for 1QFY20.
On a quarter-on-quarter basis, Duopharma’s net profit increased 8.8% from RM16.19 million for 4QFY20, while revenue grew 24.1% from RM134.09 million.
Syazwan cautioned that the recent spike in Covid-19 cases could disrupt demand for ethical drugs from the private and public healthcare segments as patients defer treatment.
However, he believes that the consumer healthcare segment should remain robust, with demand especially for its immunity boosting supplements under the Flavettes brand.
“We are comforted that the supply of 53 ethical classic treatments to government hospitals that fall under the Approved Products Purchase List remains in place until at least Dec 31, 2021,” he added.
Syazwan noted that key downside risks include a weaker-than-expected earnings contribution from the Covid-19 vaccine and lower-than-expected domestic and export pharmaceutical demand.
At the time of writing today, the counter was down three sen or 1.02% at RM2.90, giving it a market capitalisation of RM2.07 billion.
Source: TheEdgeMarkets