Review

• Duopharma Biotech Bhd’s 1HFY19 net profit of RM28.4mn (+35.2% YoY) came in within our and consensus estimates at 54.3% and 50.3% respectively.

• YoY, PBT surged 41.8% to RM37.1mn, ahead of revenue growth of 15.0% to RM295.9mn. We attribute the robust performance to: i) higher demand from public and government sectors and ii) improvement in margins. PBT margin improved by 2.4p.p to 12.5% partly due to sales of higher margin products and better operating efficiencies.

• In terms of sales mix, local sales accounted for 92.6% of revenue (government and private sector contributes circa-63% and 30% of sales respectively) while exports contributed 7.4% to total sales.

• QoQ, PBT declined by 2.5% to RM18.3mn as revenue dropped by 3.3% to RM145.5mn. The weaker performance was not a surprise, given the timing of government purchases and seasonality factor.

• For this quarter, an interim dividend of 1.0sen/share was declared (versus 1.5sen/share in 1H18. The lower dividend was in order to fund existing business expansion and also working capital purpose.

Impact

• We maintain our earnings forecast, pending analyst briefing on 5th Sept.

Valuation

• Maintain Buy on Duopharma with an unchanged target price of RM1.62/share based on an unchanged PE multiple of 19.0x CY20 EPS.

Source: TA Research - 3 Sept 2019