Review

• Duopharma’s 1H24 net profit of RM32.0mn was in line with expectations at 45.3% of our full-year forecast and 43.7% of consensus earnings.

• 2Q24 net profit grew 9.2% QoQ to RM16.7mn. This was driven by increase in government sales. For this quarter, revenue improved 13.1% QoQ to RM218.3mn, mainly driven the new Approved Products Purchase List (APPL) contract.

• In terms of sales mix, local sales remained the key contributor to the group, accounting for 93.6% of revenue while exports accounted for 6.4%.

• For this quarter, the group declared a first interim dividend of 1.0sen per share (vs. 0.5sen in 1HFY23).

• 1H24 PBT decreased by 6.1% to RM42.1mn despite higher revenue of 11.8% to RM411.3mn. We attribute the weaker performance to: i) decline in sales in the consumer healthcare segment, ii) higher operational cost from the newly completed K3 facility and iii) higher finance cost. As such, PBT margin dipped 1.9 pts to 10.2%.

Impact

• Maintain earnings forecasts.

Outlook

• We expect 3Q24 performance to improve further QoQ, driven by the timing of government purchase and the new APPL contract, which the group secured recently.

• Overall, we are optimistic about 2024 outlook as demand is levelling up. In our forecast, we project revenue and profit growth of 10.7% and 34.0% to RM780.1mn and RM70.6mn respectively in FY24.

• Separately, the group intends to increase its portfolio in the consumer healthcare segment to build up its products apart from vitamin C, such as Uphamol and IRORO anti-hair loss products that use stem cell technology.

Valuation

• We raise Duopharma’s target price to RM1.50/share (from RM1.47) based on an unchanged 16.0x CY25 EPS after factoring in the ESG premium of +3%.

Source: TA Research - 16 Aug 2024