Review

• CCM Duopharma Biotech Bhd’s 1HFY18 net profit of RM21.0mn (+9.3% YoY) came in within our estimates at 46.5% of our full-year estimates.

• YoY, 1HFY18 revenue and PBT grew by 7.0% to RM257.3mn and 5.5% to RM26.2mn respectively. The respectable performance was due to higher demand from public and private healthcare sector. We believed that tender from the government was larger which helped to lower production cost. Note that government sector contributes to circa 60% of its revenue. Meanwhile, exports continued to hover at 7.5% levels, while local sales accounted for 92.5% of its sales.

• QoQ, despite the marginal decline in revenue by 7.0% to RM124.0mn, PBT margin improved by 0.5pp to 10.4%. We are not surprise by the drop in revenue mainly due to high base effect and timing of government purchases.

• For this quarter, an interim dividend of 1.5sen/share was declared.

Impact

• No change to our earnings forecast pending investors briefing on 4th

September 2018.

Outlook

• The group will continue to move into more niche pharmaceuticals products like Erythropoietin (EPO), oncology and effervescent which will help sustained its margin.

• On the implementation of Sales and Services Tax (SST), we do not see any major catalysts for the group despite almost all of CCMD’s products being exempted from the upcoming SST. We expect growth to sustain on the back stable demand for pharmaceuticals from the government and private sector as well as export markets.

Valuation

• Our TP for CCMD is maintained at RM1.52/share based on an unchanged PE multiple of 20.0x against CY19 EPS, maintain Buy.

Source: TA Research - 28 Aug 2018