KUALA LUMPUR (June 10): Duopharma Biotech Bhd (KL: DPHARMA) is expected to see stronger performance in 2Q2024 on a resurgence in exports and tenders in the pipeline, said TA Securities.

The research firm said this in a note on Monday following the group’s 1Q2024 investor relations briefing.

It made no change to its earnings forecasts while reiterating its “buy” call with an unchanged target price (TP) of RM1.47 based on a price-to-earnings (PE) multiple of 16.0 times 2025 earnings per share.

Notably, Duopharma’s 1Q net profit surged 79.7% quarter-on-quarter (q-o-q) to RM15.3 million, ahead of revenue growth of 15.2% to RM193.0 million.

“For 2Q24, we expect a continuing improvement in performance (q-o-q and y-o-y basis), driven by the recently secured new APPL contracts from Pharmaniaga, worth RM578.1million,” added TA Securities.

The research firm said the new approved products purchase list (APPL) contracts would help to mitigate the sluggish consumer healthcare segment, which suffered an about 2% to 8% year-on-year revenue decline in 1Q2024.

“We note that the demand for Vitamin C has tapered off as the country shifted to an endemic phase, leading to lower CHC sales of 15% and 25% y-o-y in FY22 and FY23 respectively. In all, we are optimistic for 2024 as demand is levelling up,” it said.

In its forecast, TA Securities projects Duopharma’s revenue to grow 10.7% to RM780.1 million in FY2024, with profit seen rising 34.0% to RM70.6 million.

RHB Research noted that Duopharma is currently trading at 0.2 standard deviation (SD) below its five-year historical mean of 17 times, which it deems “unjustified” due to its better than peers’ margin profile, higher budget allocation for the healthcare sector and advantages in handling trends of an ageing society.

It has raised its TP to RM1.44, implying 16 times FY2024 PE, 0.3 SD above its five-year historical mean.

The research house also trimmed its FY2024 to FY2025 earnings by 12% and 13% as sales recovery in its consumer healthcare segment came below its expectation, offset by an uptick in public sector sales.

RHB also lowered its capex assumption to align with management’s guidance.