Pharmaniaga’s 9M21 core PATAMI of RM103.0m (+131.2% YoY) exceeded both our and consensus’ expectations, at 153% of full-year estimates. The discrepancy to our forecast was mainly due to stronger-than-expected revenue, supported by the sale of Sinovac vaccines. We revise our earnings forecast upwards by 7-79% for FY21-23f, but we lower our PE multiple from 21.5x to 18.5x (at +1SD of 5-year mean), as we opine that the supply of booster shots are unlikely to garner the same amount of doses required as compared to the previous mass vaccination programme. With that, we marginally lower our TP to RM1.04, from RM1.13. Maintain BUY.

Above expectations. 3Q21 core PATAMI of RM58.0m (+212.7% QoQ, +1222.3% YoY) brought 9M21’s sum to RM103.0m (+131.2% YoY), making up 153% of our and street projections. The positive surprise was due to stronger-than-expected revenue, supported by the sale of Sinovac vaccines. Core PATAMI was arrived at after adjusting for EIs (impairments, provision of stock obsolescence and forex) amounting to RM16.0m

Dividend. 3Q21 declared dividend 2 sen per share, going ex on 6th Dec 2021. (9M21: 4.3 sen). 3Q20: 0.3 sen (9M20: 2 sen)

QoQ. Revenue grew by 81.2%, predominantly supported by the sale of Covid-19 vaccine to both the Ministry of Health (MOH) and private sector. In tandem with the growing topline, core PATAMI also grew by 212.7%.

YoY. Positive growth across all of Pharmaniaga’s business divisions have resulted in revenue increasing by 241.3%. Revenue contribution from its manufacturing division grew substantially by 1435%, due to the fill-and-finish operations of the Sinovac vaccine. Core PATAMI was up by 1223.2%.

YTD. Revenue was up 96.3%, mainly driven by the sale of vaccine to MOH and private sector and growth across all key divisions. However, profitability of its logistics and distribution division was weaker, with PBT declining 20.5%, due normalised demand of PPE. This was neutralised by the improved performance of its manufacturing division, with PBT growing 805.4%. All told, core PATAMI still rose by 131.2%, in tandem with the growing sales.

Outlook. The National Pharmaceutical Regulatory Agency (NPRA) has recently authorised the use of Sinovac vaccines as booster shots for adults aged 18 and above. However, we note the MOH has yet to announce any additional Sinovac procurement for the purpose of booster shots thus far. Pharmaniaga is currently supplying booster shots to the private market at this juncture and recipients are expected to pay out-of-pocket for the booster. We do not rule out the possibility of MOH procuring Sinovac boosters from Pharmaniaga in the near future; however, we expect the quantity supplied to be smaller this time around, premised on (i) only single dose required as booster, and (ii) booster shots are not made compulsory.

Forecast. We raise our FY21-23f forecasts by 7-79% to account for the higher sales contribution from the supply of Sinovac vaccine to MOH, private sector and other countries outside of Malaysia.

Maintain BUY, TP: RM1.04. We lower our PE multiple on Pharmaniaga to 18.5x (at +1SD above 5-year mean) tagged to FY22 EPS, from 21.5x previously, as we believe that the supply of booster shots is unlikely to garner the same amount of doses required as compared to the previous mass vaccination programme. With that, our TP is marginally lowered to RM1.04, from RM1.13 previously. Maintain BUY.

Source: Hong Leong Investment Bank Research - 22 Nov 2021