KUALA LUMPUR (Sept 23): Pharmaniaga Bhd's (KL:PHARMA) completion of its regularisation plan positions the group for a PN17 exit by 1QCY2026, according to MBSB Research.
The house, in a note on Tuesday upgraded its call on the counter to a "buy" with a target price of 32 sen.
" We revised Pharmaniaga’s valuation to include this update, as well as its long-term plans for its logistics & distribution, and manufacturing operations moving forward," said MBSB.
Pharmaniaga's regularisation plans involved a capital reduction and a massive private placement.
This exercise saw 19 new investors come on board, swelling the number of issued shares to 6.557 billion, from 1.441 billion previously.
While this diluted substantial shareholders' stakes from 55% to 44%, it successfully recapitalised the company.
Pharmaniaga has guided that it is expecting stock-keeping-unit (SKU) volumes for its logistics & distribution business to be between 10%-12% year-on-year (y-o-y) for 2HFY2025, subsequently guiding revenue for the segment to grow at 15%-20% y-o-y.
MBSB expects Pharmaniaga to show improved performance under the basis of uninterrupted operations and expansion, strong cash flow post-regularisation plan, and continuous government support from regulations and concessions.
"We believe that ongoing concession with the MOH (Ministry of Health), as well as continuous expansion in the group’s logistics & distribution, and manufacturing segments, will continue to contribute to Pharmaniaga’s growth potential."
MBSB said as governments and healthcare providers focus on reducing healthcare costs, Pharmaniaga’s generic drug portfolio offers an attractive upside, being cheaper and readily available, while its biopharmaceutical products are expected to contribute significantly from 2HFY2026 onwards.
The house said Pharmaniaga is expected to add over 91 new biopharmaceutical products in the next five years.
"In addition to this, we opine that biopharmaceuticals will provide additional margins to its existing generic drugs," it added.
MBSB said Pharmaniaga has not been producing many generic drugs in comparison to its peers.
As such, the company's manufacturing business is set to launch at least 10 products per year (as opposed to 2-3 products previously).
"We believe this is a sound decision, as NPRA (National Pharmaceutical Regulatory Agency) and MOPI (Malaysian Organisation of Pharmaceutical Industries) are now improving their efforts to fast-track certain drugs from manufacturer to market, while maintaining compliance and due diligence," it added.