KUALA LUMPUR (Dec 8): Kenanga Research has initiated coverage on Kotra Industries Berhad at RM5.42 with an “Outperform” call and target price (TP) of RM7.00.
In a note on Thursday (Dec 8), the research house said it likes Kotra for: (i) the bright prospects of the over-the-counter (OTC) drug market, (ii) its integrated business model encompassing the entire spectrum of the pharmaceutical value chain from R&D, product conceptualisation to manufacturing and sales, (ii) the superior margins of its original brand manufacturing (OBM) business model (vs. low-margin contract manufacturing) with established household brands such as Appeton.
Kenanga said Kotra’s investment appeal lies in its superior margins amongst local listed comparable peers.
“The combined impact of economies of scale and scope and sales effectiveness translate to superior financial metrics. In FY22, it exhibited one of the highest EBITDA margin at 35%.
“On average, Kotra’s average FY17-FY22 EBITDA margin is at 24% which is higher than that of the industry average of about 12%.
“We value Kotra at RM7.00 based on 15x FY24F EPS, in line with its peers’ average,” it said.
Source: TheEdge - 9 Dec 2022
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