Bright outlook for Duopharma despite lower 3Q profit

PETALING JAYA: Duopharma Biotech Bhd’s long-term earnings outlook remains bright despite posting a lower net profit for the third quarter ended Sept 30, 2022 (3Q22).

RHB Research said this will be underpinned by investments into high-value pharmaceutical products such as oncology and synergies generated from investee companies.

Duopharma’s net profit for 3Q22 slid 3.6% year-on-year (y-o-y) to Rm16.3mil while cumulatively for the first nine months of 2022, net profit rose 5.6% y-o-y to Rm53mil.

Revenue for the quarter was up 3% y-o-y to Rm177mil, which took Duopharma’s cumulative turnover for the nine months to Rm545mil, or 9.3% y-o-y growth.

Likewise, earnings per share dropped 4.4% y-o-y for 3Q22 but rose 5.3% y-o-y for the first nine months of 2022 to 5.59 sen.

The research house said it believes contribution from the Insugen insulin supply agreement (signed in April) to the Health Ministry has strengthened 3Q22 top line growth.

On a sequential basis, it said the consumer healthcare segment may appear to have plateaued, leading to a 4.7% quarter-on-quarter (q-o-q) decline in local sales.

CGS-CIMB Research, which is maintaining its “add” call on the stock with a target price of RM1.85, said it expects gross profit margin to soften q-o-q in 4Q22 and 1Q23, as insulin sales rise gradually and the impact of high raw material prices exacerbated by the stronger US dollar to ringgit kicks in.

UOB Kay Hian Research said the company’s 3Q22 earnings were within its expectations but higher than consensus’ despite normalising consumer healthcare dampening sales growth.

Robust gross margins partially alleviated the uptick in operating expenditure.

“We believe that as the Covid-19 pandemic hype diminishes, Duopharma’s strong execution, consistent earnings growth and highly palatable valuations should gradually catalyse interest in the stock and as such, we are maintaining a ‘buy’ call with a target price of RM2.05,” it added.