Secures RM578mn Contracts From MOH

Duopharma has accepted 11 letters of offers from Pharmaniaga to supply 86 pharmaceutical and/or non-pharmaceutical products, with a total estimated value of RM578.1mn, to the offices and facilities operated and controlled by the Government of Malaysia. All the contracts will be valid and binding until 31 December 2026 or such other date as directed by the Government of Malaysia.

Our View

We are not surprised about the New Approved Products Purchase List (APPL) contract, as management shared that price negotiations concluded in February 2024. We believe that the 86 SKUs won (vs. 50 SKUs previously) will bode well for the group. Based on our back-of-the-envelope calculation, the new contract will contribute an additional RM37.7/56.7/56.7mn to FY24/25/26 sales compared to the previous APPL contract.

As such, we maintain our FY24/25/26 APPL sales contribution at RM198/217/217mn. We expect the group to return to its growth trajectory in 2024, boosted by the new APPL contract.

Impact

No Change to Our Earnings Projections.

Valuation& Recommendation

We maintain Duopharma’s target price at RM1.47/share, which is based on a PE multiple of 16x CY25 earnings. Reiterate BUY.

Source: TA Research - 2 May 2024