Pharmaniaga has received a request to supply 7m doses of Sinovac Covid-19 vaccine to government-linked companies (GLCs) and state governments. This announcement comes as no surprise given that Pharmaniaga has additional Sinovac vaccine supply which is yet to be taken up. Pharmaniaga has an expected supply pipeline of 24m doses of Sinovac vaccines (14m from their fill and finished operations and 10m finished doses) to distribute, with only 12m promised to MoH. As this announcement comes as no surprise, our forecasts remain unchanged. We keep our TP of RM5.52 pegged to 21.5x PE on FY22 (+2SD five year average mean) unchanged. However, we downgrade our call from a Buy to a HOLD as we reckon Pharmaniaga has reached its fair value. Note that the share price has surged 80.5% since Apr-21.

NEWSBREAK

Pharmaniaga has received a request to supply 7m million doses of Sinovac Covid- 19 vaccine to government-linked companies (GLCs) and state governments. Defence Minister Datuk Seri Ismail Sabri said the pharmaceutical company has received a request to supply 4m vaccine doses to GLCs and 3m doses to state governments.

HLIB’s VIEW

To recap, Sinovac’s initial agreement of 8,820L bulk order for fill and finish is equivalent of 14m doses. 12m is contracted to for the Ministry of Health (MoH) and 2m doses are intended to be sold to the private sector. Furthermore, Pharmaniaga had recently ordered an additional 10m finished doses for distribution from Sinovac.

All in all, Pharmaniaga has an expected supply pipeline of 24m doses of Sinovac vaccines (14m from their fill and finished operations and 10m finished doses) to distribute, with only 12m promised to MoH. As such, this announcement comes as no surprise given that Pharmaniaga has additional Sinovac vaccine supply which is yet to be taken up.

Earnings impact of Sinovac vaccines. Based on our back of the envelope calculations, we expect the fill and finish of 14m doses to add circa RM15.5m at the EBIT level. This is based on (i) purchase price of USD11 (RM44) per dose (given that Indonesia had purchased completed Sinovac vaccines for USD13.60 per dose) (source) (ii) EBIT margin of 2.5% based on 3-year average L&D EBIT margin. While we have yet to factor in the financial impact of the additional 10m finished doses ordered recently, we expect the earnings impact to be minimal, as the nature of these will be purely trading, we reckon the margins will be razor-thin.

Forecasts: As this announcement comes as no surprise, our forecasts remain unchanged.

Downgrade to HOLD, TP: RM5.52. We keep our TP of RM5.52 pegged to 21.5x PE on FY22 (+2SD five year average mean) unchanged. However, we downgrade our call from a Buy to a HOLD as we reckon its fair value has been reached. Note that the share price has surged 80.5% since Apr-21.

Source: Hong Leong Investment Bank Research - 2 Jun 2021