Apex Healthcare’s (ApexH) 3QFY23 net profit dropped 10% YoY to RM24.2m, mainly due to normalising of consumer healthcare demand. After stripping off the non-operating items, ApexH’s 9MFY23 core net profit increased by 12.9% to RM74.7m. The results exceeded both our and consensus estimates at 97% and 83% of full-year forecasts respectively. The discrepancy in our forecast was mainly due to the better-than-expected performance in manufacturing segment. We raised our FY23F earnings by 19%, as we factor in higher sales from manufacturing segment, while maintaining our FY24-25F earnings as we remain cautious on slowing demand for Covid-related products. All told, we maintain our Neutral call on ApexH, with an unchanged TP of RM2.41 based on 19x 5-year historical mean on FY24F EPS.

• Revenue. ApexH reported a revenue of RM235.3m (+1.4% YoY) in 3QFY23, mainly attributed to the intensified sales and marketing efforts deployed to address decelerating market demand on consumer healthcare. ApexH’s manufacturing segment recorded an increase of 17% YoY to RM26.2m, while the distribution segment declined by 0.2% YoY to RM209.1m.

• Net profit. ApexH’s 3QFY23 net profit declined 10% YoY to RM24.2m while PBT margin dropped by 1ppt to 12.9% in 3QFY23 mainly attributed to higher operating cost as a result of inflationary pressure. The Group also expects a normalisation of orders for manufacturing of orthopaedic devices until 1HFY24, mainly due to key customers optimizing inventories following robust orders during post-pandemic period.

• Outlook. We remain cautious on the normalisation of demand for Covidrelated products and potential escalation of imported raw material costs. Nevertheless, we remain optimistic on the Group’s long-term prospect with proactive evaluation of new growth opportunities and the ongoing review of plans to expand warehousing and pharmaceutical liquid production capacity which underscores the Group's commitment to adapt to evolving market dynamics. As such, we maintain our Neutral call on ApexH.

Source: PublicInvest Research - 30 Nov 2023