FY21 PATAMI of RM172m (5-fold YoY) came above expectations at 160% of our and consensus forecasts. The variance on our side was due to better-than-expected vaccines sales. Hence, we raise FY22E net profit by 17% and TP from RM0.74 to RM0.77 based on unchanged 13x FY23E EPS. We also roll over our valuation base from FY22E to FY23E. Reiterate MARKET PERFORM.

Results’ highlights. QoQ, 4QFY21 top-line fell 66% due largely to lower sales of the Sinovac COVID-19 vaccine to the Government. PBT margin rose from 6% to 20% due to the lower selling and distribution expenses incurred on the frequent delivery of Sinovac COVID-19 vaccine. This brought 4QFY21 PATAMI higher by 72% to RM85.5m boosted by lower effective tax rate of 32% compared to 49% in 3QFY21. A 4th interim dividend of 5.0 sen was declared, bringing FY21 DPS to 9.3 sen which is above our expectation.

YoY, FY21 revenue rose 77% due to strong demand from the concession business and sales of Sinovac COVID-19 vaccine to the government. The Logistics and Distribution division recorded a higher PBT of RM73m (+88%) due to the surge in demand experienced by the Group’s concession business as well as the distribution of vaccines. The Manufacturing division turned in a PBT of RM209m compared to RM10m in FY20 mainly contributed by the Sinovac COVID-19 vaccine. This brings FY21 PATAMI to RM172m (5-fold YoY).

Outlook. Despite recording bumper profits in 4QFY21, we do not expect sequential net profit growth going forward since most of the vaccines delivery has been completed. The majority of Sinovac recipients received their second dose and as such, the requirement for a booster shot will could provide earnings visibility in subsequent quarters. Pharmaniaga had previously supplied more than 22m doses of Sinovac vaccine to MOH and the private sector and is ready to supply up to 10m doses. Leveraging on the experience and expertise in manufacturing fill and finish the Sinovac COVID-19 vaccine, the Group intends to export the vaccine to countries such as Indonesia, Philippines, Cambodia, Thailand and several African nations, that are facing vaccine supply shortages. Pharmaniaga is actively negotiating with Sinovac Biotech Ltd to secure a deal to allow the Group to speed up the supply of vaccines to these countries. With its proven track record in vaccine management and wide distribution channels, the Group is optimistic that it will be able to secure the deal. In Indonesia, moving forward, the Group is optimistic in improving its profitability. This came on the back of the successful reorganisation of its business operations to enhance operational efficiency. These include the appointment of a local Indonesian as President Komisari to strategise its logistics arm in Jakarta and Local President Director for its manufacturing arm in Bandung.

We raise our FY22E net profit by 17% due to better-than-expected vaccines sales. We also introduce FY23E earnings.

Reiterate MP. Correspondingly, we raise our TP from RM0.74 to RM0.77 based on unchanged 13x FY23E EPS (-0.5SD below its 5- year historical forward mean). We roll forward our valuation base from FY22E to FY23E. The saving grace is a 5.3% dividend yield.

Key risk is lower-than-expected volume sales and risk of concession not extended.

Source: Kenanga Research - 18 Feb 2022