We attended Pharmaniaga’s 2Q21 results briefing and came away feeling positive on the group’s prospects going forward. Pharmaniaga have outlined 3 potential demand sources for which have the potential to add 26.2m dose orders: (i) vaccination of adolescents in Malaysia, (ii) approval of booster doses, and (iii) export of Sinovac vaccines to other countries. Forecast remains unchanged. We keep our TP of RM1.13 based on an unchanged PE multiple of 21.5x (+2SD five year mean). Maintain BUY.

We attended Pharmaniaga’s 2Q21 results briefing and came away feeling positive on the group’s prospects going forward.

Sinovac vaccine delivery updates. In total, Pharmaniaga has secured 34.4m Sinovac doses (14m from their fill and finish facility, 20.4m finished goods) and 28.4m contracted to the government and other entities as part of the National Immunisation Program (NIP). Since July, Pharmaniaga have received NPRA approval to fill 2 doses per vial which translates to fill and finish capacity of 4m.

Potential new demand for Sinovac vaccines. Pharmaniaga outlines 3 potential demand sources for which have the potential to add 26.2m dose orders (Figure #2). Based on DOSM data, we believe there are 3.2m Malaysians aged between 12-17. While this would theoretically equate to 6.4m in potential orders for Sinovac, we believe that in the event NPRA approves Sinovac for adolescent use, order volumes would be significantly lower than 6.4m as a portion of this age group will likely be vaccinated by Pfizer, which has already been approved by the NPRA. With regards to a booster dose being approved in Malaysia, we believe it is likely to be approved soon as Israel has already begun administering booster shots and UK have made plans for it as well. Furthermore, we note that RM3.5bn the government has been allocated for booster shots (source). Assuming there is no mixing of vaccine types, we reckon this could add approximately 10.2m dose orders. Pharmaniaga have also shared that they are currently in talks with Sinovac Biotech to supply vaccines to neighbouring countries and parts of Africa via their fill-and-finish facility, which management estimates could add up to 10m dose orders. We understand that Malaysia is one of five countries (Turkey, Hungary, Egypt, Indonesia) outside of China that has been authorised to conduct fill-and-finish for Sinovac. However, Pharmaniaga requires WHO approval before this venture can be undertaken.

3Q earnings outlook. With ~7m fill and finish Sinovac vaccines yet to be delivered, we expect 3Q21 earnings to remain strong. Note that 2Q21 manufacturing PBT rose significantly (+28.0 QoQ, +282.4% YoY) mainly from the fill and finish of Sinovac vaccines.

Forecast. Unchanged.

Maintain BUY, TP: RM1.13. We keep our TP of RM1.13 based on an unchanged PE multiple of 21.5x (+2SD above 5 year mean). We reckon the possibility that Sinovac vaccines being approved as booster shots and for adolescent use is likely to occur in 2H21, which would serve as a share price catalyst. Maintain BUY.

Source: Hong Leong Investment Bank Research - 27 Aug 2021