Valuation / Recommendation

Results were above expectations, achieving 106.9% and 140.5% of our full year revenue and profit forecasts for FY21 due to stronger than expected revenue, boosted by sale of Sinovac vaccines to the private sector. We maintain a BUY recommendation on Pharmaniaga Berhad over a revised TP of RM1.09 based on FY23F EPS of 5.7 sen and PE of 19.2x, at a 20% discount to the 5-years average.

Investment Highlights

Key catalyst was from the non-concession business due to Sinovac vaccine sales of 20.4m doses to the Ministry of Health (MOH) to date, and 2.5m doses to the private sector. There is also a possibility of further earnings growth that could come from the potential approval of Sinovac vaccines for children.

Nevertheless, we expect quantity supplied this time to be lesser on the premise of (1.) only single dose required as a booster. (2.) adoption of Pfizer vaccines as an optional booster shot for fully vaccinated Sinovac recipients. Besides that, the group is also targeting to export Sinovac vaccines in FY22 which should provide earnings visibility in the short run if successful.

The company received a conditional letter from the Ministry of Health (MOH) in Dec 2021 for the continuation of medical supply to MOH facilities for a period of 10 years. We expect the terms and conditions would likely be finalised in 1H22, and the extension would provide the company with earnings visibility for the next 10 years.

Dividend. Dividend of 5.0 sen per share was declared on 4Q21, ex on 7th Mar 2022. (FY21 – 9.3 sen, 4Q20 – 1.0 sen, FY20 – 2.2 sen)

Risk factor. Waning orders for Sinovac vaccine as a result of increasing vaccination rates. Failure to extend further existing concessions.

Source: Mercury Securities Research - 3 Mar 2022