Nova Wellness’ year ahead to be fueled by new SKUs in 2022

KUCHING: Nova Wellness Group Bhd’s (Nova Wellness) financial year 2023 (FY23) volume growth is expected to be fueled by the full impact of the introduction of new stock keeping units (SKUs) in FY23, analysts observed.

“The prospect for the domestic health supplement market is strong, driven by the rising awareness for proper nutrition intake and growing ageing population.

“The Malaysia nutraceuticals market is projected to reach US$1,382.3 million by 2027 from US$794.4 million in 2020.

“Zooming in on Nova Wellness, the group guided for a 15 to 18 per cent volume growth (which is consistent with our FY23 volume and ASP assumption of 17 and two per cent increases, respectively), having chalked up an average volume growth rate of 16 to 18 per cent in FY20-FY22.

“Specifically, FY23 volume growth is expected to be fueled by full-year impact from the introduction of 35 new SKUs in FY22,” the research team at Kenanga Investment Bank Bhd (Kenanga Research) said in a report.

Meanwhile, on Nova Wellness’ 1QFY23 performance, it noted that the group’s core net profit of RM4.4 million met expectations.

On a year-on-year (y-o-y) basis, Nova Wellness’ 1QFY23 revenue and net profit fell 17 and 15 per cent, respectively.

“However, we are unperturbed as we believe it was due to the high base effect in 1QFY22, probably on the back of introduction of new products or stronger promotional campaigns,” it said.

On a quarterly basis, Nova Wellness’ 1QFY23 turnover grew 13 per cent due to price hikes and to a certain extent, the possibility of consumers stocking up health supplement products taking precautions amidst rising cases of the common flu and influenza-like illnesses (following increased contacts within the population after the lifting of pandemic restrictions).

“1QFY23 core net profit more than doubled on reduced startup cost incurred arising from commercial production in its new plant and better overhead absorption on improved sales volumes,” it added.

All in, Kenanga Research maintained its ‘outperform’ rating on the stock.

“We like Nova Wellness for its integrated business model which encompasses the entire spectrum of pharmaceutical value chain from product conceptualisation starting from R&D to manufacturing and sales, superior margins due to its original business manufacturing (OBM) business model, and earnings growth driven by capacity expansion, a widening distribution network and penetration into local public hospitals.”