Review

• Duopharma’s 9M24 net profit of RM47.6mn was in line with our expectations but below the consensus forecast, accounting for 77.0% and 69.0%, respectively.

• 9M24 PBT increased by 11.3% to RM62.6mn, in-tandem with a 15.4% rise in revenue to RM620.0mn. We attribute the stronger performance to the public health segment, driven by the new APPL contract. Additionally, sales to the private sector grew. However, PBT margin declined by 0.4pts to 10.1% due to higher finance and operational costs associated with the new K3 facility.

• In terms of sales mix, local sales remained the key contributor to the group, accounting for 93.3% of revenue while exports accounted for 6.7%.

• 3Q24 net profit decreased by 6.6% QoQ to RM15.6mn. This was due to weaker sales to the prescription market. For the quarter, revenue fell by 4.4% to RM208.7mn.

Impact

• No change to our FY24-26 earnings projections.

Outlook

• We expect 4Q24 performance to be slightly weaker QoQ due to lower sales to the public sector, as the government typically reduces spending on medical procurement in December.

• Into FY25, we expect Duopharma’s earnings to grow by 43.1% to RM88.4mn, driven by: i) higher contributions from the new APPL contract, ii) a stronger Ringgit and iii) lower Active Pharmaceutical Ingredient prices.

Valuation

• We maintain Buy on Duopharma with an unchanged TP of RM1.50/share based on an unchanged 16.0x CY25 EPS and 3% ESG premium.

Source: TA Research - 11 Nov 2024