Review

• CCM Duopharma Biotech Bhd’s FY18 net profit of RM47.6mn (+12.2% YoY) was within ours and consensus estimates.

• YoY, FY18 PBT grew by 15.4% to RM59.7mn, ahead of revenue growth of 6.6% to RM498.7mn. The satisfactory performance was attributed to increased demand from public and government sectors. We opine that other contributing factors would include favourable product mix from growing contribution from specialty products. Moreover, we believe that its OTC products, namely from Proviton, Uphamol, Flavettes and Champs, registered double-digit growth in FY18.

• In terms of sales mix, local sales remained the key contributor to the group, accounting for 91.3% of revenue while exports continued to hover at around 8.7% levels.

• A final dividend of 4.0sen/share was proposed (FY18: 5.5sen/share vs. FY17: 3.6sen/share). This translates to a dividend payout ratio of 68%, which is much higher than FY17 payout ratio of 55%.

Impact

• We make no change to our earnings forecast, pending meeting with management.

Outlook

• We see a plenty of opportunities for CCMD from the higher budget allocation given to the Ministry of Health (+7.8% to RM29bn during budget- 2019). Moreover, its 3-year insulin contract (from 2 December 2016 to 1 December 2019) worth RM300mn will provide a good earnings visibility for FY19.

• Note that the group has recently received registration approval for Erysaa, an Erythropoeitin (EPO) product which promotes the formation of red blood cells by the bone marrow. To recap, the estimated total market value for EPO is around RM50-60mn/annum. CCMD purchased the drug from supplier in South Korea.

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 - 19 Feb 2019