Pharmaniaga performance hit by high finance cost
Pharmaniaga Bhd’s (Pharmaniaga) net earnings slipped 83 per cent year-onyear (y-o-y) while cumulatively for nine months, its earnings declined by 57.2 per cent y-o-y to RM37.1 million largely due to higher finance cost on the back of higher borrowings, analysts observed.
In a report, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) pointed out that the group’s revenue declined 56.6 per cent yo-y but gained 21.5 per cent q-o-q to RM924.7 million.
For the cumulative nine months, revenue slipped 35.5 per cent y-o-y to RM2.65 billion.
“Lower sales from its concession segment due to the timing of orders from the Ministry of Health (MOH) contributed to the lower revenue; offset by the higher revenue from other segments including non-concession and Indonesia businesses,” it said.
Nevertheless, it pointed out that the group’s Indonesian division recorded a rise in revenue by 1.5 per cent y-o-y and 15.9 per cent q-o-q to RM260 million.
Earnings from this division rebounded more than 100 per cent from a deficit of RM5.1 million in 2QFY22 and RM2.4 million in 3QFY21 to RM18.9 million.
“The improvement is due to its operational efficiency in stock optimisation, aggressive collection effort and digitalisation in its business processes,” it said.
Moving forward, it highlighted that the Indonesia segment remains as the group’s key development growth, due it its excellent performance, primarily driven by improved operational efficiency, digitalisation, continued stock optimisation, aggressive collection operations, and an expanding product portfolio.
“On the domestic front, the group is emphasising the use of its portfolio in the private sector, which has seen revenue growth to more than RM120 million.
“In addition, the group anticipates that its concession business will continue to develop by the end-year, with growth predicted at up eight per cent, as a result of MoH adding more products to the Approved Products Purchase List (APPL),” MIDF Research said.
All in, despite its weak performance, the research team retained its ‘buy’ call on Pharmaniaga.
“We expect its marketing strategies and employee recruitments to continue for three to five more years, as earnings gradually return higher on the back of more demand for its products regionally and locally.
“With the reign of a new government, Pharmaniaga is expected to leverage based on the increased allocations by five per cent of GDP to the Healthcare sector, in addition to new demands expected for specialty drugs to treat mental health illnesses and NCDs.
“We also reiterate our positive stance that its wager on its long-term marketing plans would benefit the group in the long run.
“Nevertheless, we opine that Pharmaniaga will face challenges as well, including the increased cost of raw materials for manufacturing drugs and changes in governmental policies regarding the manufacture and distribution of pharmaceutical products to the local and regional clients,” it said.