PETALING JAYA: Duopharma Biotech Bhd
’s earnings are expected to recover in 2025, driven by lower input cost and enlarged government contracts.
The fourth quarter of financial year 2024 (4Q24) revenue should see sequential growth, despite the usual seasonal lull, given that additional government contracts were announced on Oct 30, said UOB Kay Hian (UOBKH) Research.
The brokerage slashed its 2024 earnings forecast for Duopharma by 18% to account for lower sales and margins, but largely maintain 2025-26 earnings forecasts as the outlook on input cost is favourable.
The research house said key risks include single customer concentration, as 50% of Duopharma’s sales are from the government, and the strengthening of the US dollar.
Duopharma’s collective approved product purchase list (APPL) contracts awarded by the government this year amounted to RM665mil or RM222mil per annum as of Dec 26.
UOBKH Research gathered that a US$1/RM4.70 foreign-exchange assumption has been in-built for this round of government contracts.
While the new awarded amount implies an uplift of close to 40% of APPL sales vis-a-vis 2023, the research house cautioned that this is just an indicative contract amount and actual sales could deviate from RM222mil per annum.
Additionally, Duopharma’s non-APPL insulin contract of RM125mil per annum expires on April 25 and could face enhanced competition from Pharmaniaga Bhd.
For now, Duopharma’s APPL contracts should underpin 2025-2026’s earnings growth, UOBKH Research added.
The brokerage maintained its “buy” call with an unchanged target price (TP) of RM1.39 per share, despite the cut in 2024 earnings forecast, as its TP is based on 2025’s unchanged earnings forecasts.
Meanwhile, TA Research expects the group’s 4Q24 performance to be slightly weaker quarter-on-quarter due to lower sales to the public sector, as the government typically reduces spending on medical procurement in December.
Going into financial year 2025 (FY25), the research house expects Duopharma’s earnings to grow by 43.1% to RM88.4mil, driven by higher contributions from the new APPL contract, a stronger ringgit and lower active pharmaceutical Ingredient prices.
TA Research maintained its FY24-FY26 earnings projections for Duopharma.
It kept its “buy” call on the stock with a TP of RM1.50, based on an unchanged 16 times 2025 earnings per share.
