KUALA LUMPUR (May 19): Analysts do not expect Pharmaniaga Bhd's earnings to return to pre Covid-19 levels this year, after the group’s earnings for the first quarter ended March 31, 2023 (1QFY2023) fell short of their expectations.
For Hong Leong Investment Bank (HLIB) Research’s analyst Sophie Chua Siu Li, there are some pressing concerns that could negatively impact Pharmaniaga’s performance going forward, including its Practice Note 17 (PN17) status, the needs to secure working capital funding, as well as higher financing costs.
This is despite the expected renewal of the group’s concession contract that will provide earnings clarity over the next 10 years, she said.
“The weak set of results came in below both our and consensus estimates of 16% and 15% respectively,” said Chua. She had also trimmed Pharmaniaga’s earnings forecasts for the financial year ending Dec 31, 2023 (FY2023) and FY2024 by 6%, due to rising finance costs assumptions.
HLIB Research maintained a “sell” rating for Pharmaniaga, with a 30 sen target price (TP), which was slightly lower than 31 sen previously. This is based on a price-earnings multiple of 11.6 times on the group’s FY2024 forecast earnings per share of 2.6 sen.
Meanwhile, Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng said: “We do not not expect Pharmaniaga’s earnings to return to pre-pandemic level.
“Now, with the rising interest rate and higher material costs, [it’s] business is still tough. It takes time for Pharmaniaga to recover,” he told The Edge when contacted.
Pharmaniaga's share price fell 7.89% to a low of 35 sen on Friday (May 19), despite the group returning to the back with a net profit of RM2.65 million in 1QFY2023, compared to a net loss of RM664.39 million in the immediate preceding quarter, due to RM552.3 million of impairment of Covid-19 vaccines.
The latest quarterly earnings is a far cry from the pre-pandemic level, when it posted RM19.6 million in net profit in 1QFY2019. Pharmaniaga’s results were hit by lower customer demand in both its concession and Indonesian businesses, as well as higher finance costs.
The counter pared its losses at 36 sen at Friday’s market close — down two sen or 5.26% — giving it a market capitalisation of RM471.67 million. It has fallen 34.55% year-to-date and 50% over the past year.
According to Bloomberg data, Pharmaniaga has three “sell” and two “hold” calls, with a 12-month TP of 34 sen.