Review

• Duopharma’s 1Q24 net profit of RM15.3mn came in within our expectations at 21.7% but below consensus’ full-year forecasts at 18.4%.

• QoQ, PBT surged to RM20.1mn as compared to RM7.0mn in 4Q23. We attribute the decent performance to higher sales from all sectors, particularly higher government purchase during the quarter which boosted the revenue by 15.2% QoQ to RM193.0mn in 1Q24.

• In terms of sales mix, local sales remained as the key contributor to the group, accounting for 91.6% of revenue while exports accounted for 8.4%.

• 1Q24 net profit declined by 32.5% to RM15.3mn while revenue dipped 3.7% to RM193.0mn. The weaker performance was due to: i) lower demand from private and public health segments, ii) higher operational cost due to the newly completed K3 plant, iii) higher finance cost and iv) higher tax rate.

Impact

• No change to our earnings forecasts.

Outlook

• We are optimistic that 2Q24 would be stronger for Duopharma, boosted by the New Approved Products Purchase List (APPL) contract that the group secured recently.

• Overall, we remain sanguine about FY24 prospects, driven by higher budget allocation to the healthcare sector, which surged 13.5% YoY to RM41.2bn.

Valuation

• Reiterate Buy on Duopharma with an unchanged TP of RM1.47/share based on an unchanged 16.0x CY24 EPS.

Source: TA Research - 24 May 2024