Review

• CCM Duopharma Biotech Bhd’s 9MFY18 net profit of RM33.3mn (+9.8% YoY) was within ours and consensus estimates at 73.3% and 71.6% respectively.

• YoY, 9MFY18 revenue and EBIT grew by 7.7% to RM383.1mn and 11.8% to RM46.1mn respectively as there was higher demand from public and government sector. Note that the government sector contributed to circa 61% of its revenue, while the private sector and over-the-counter products contributed about 18% and 12% respectively. Meanwhile, exports continued to hover at 8.7% levels, while local sales accounted for 91.3% of its sales.

Impact

• No change to our earnings forecast.

Outlook

• We are positive on the higher allocation given to the Ministry of Health (MOH) by 7.8% to RM29bn in the recent Budget 2019. We believe CCMD will benefit from it as one of the main drug suppliers to government.

• Further weakening of Ringgit against USD is expected to affect margins going forward. However, we note that the group would continue to move into more niche products which will help to mitigate the impact.

Valuation

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

Source: TA Research - 29 Nov 2018