Pharmaniaga earnings in doubt as the concession nears expiry


PHARMANIAGA Bhd’s earnings visibility is in doubt beyond 2021 as the extended concession for the government’s drug and medical supply expires on Dec 31, though the concession might be prolonged.

Mercury Securities Sdn Bhd, in a report yesterday, noted that the extension of the concession will ensure there is no disruption in medical supply to government hospitals and clinics.

Pharmaniaga’s operation in Indonesia has also been affected due to the emergency community activity restrictions arising from the second wave of the Covid-19 pandemic.

“Since the pandemic has worsened lately, the revenue recovery in Indonesia which contributed RM801 million in the financial year ended Dec 31, 2020 (FY20), is not insightful. Hence, we expect flat revenue growth in FY22 for Indonesia,” Mercury Securities noted.

Pharmaniaga is the sole and exclusive manufacturer and distributor of the Sinovac vaccine in Malaysia with a production capacity of two million doses per month and is expected to ramp up to four million doses by Aug 21.

The company would have completed its initial delivery of the government order of 12 million Sinovac vaccine doses by July 21 and has received further orders of seven million doses to state governments, government-linked companies (GLCs) and additional two million doses to the federal government.

However, the government unexpectedly announced to stop administering Sinovac vaccine once the stocks depleted, opting for the Pfizer-BioNtech vaccine.

Mercury Securities stated that filling up the production order of 48 million doses per annum will be a tall order for Pharmaniaga especially when the Sinovac vaccine has a lower efficacy against the Delta variant.

“Hence, the optimism on the new vaccine division which hinges solely on the Sinovac vaccine looks uncertain and makes earnings forecast difficult,” it added.

Mercury Securities added that the resurgence of Covid-19 through new variants will delay Pharmaniaga’s business recovery, especially in Indonesia.

“(The) new vaccine division is facing an efficacy issue on its Sinovac vaccine, and to be the world’s first Halal vaccine facility takes time to 2024,” it said.

Mercury Securities sees the risk factors for Pharmaniaga through its new orders for Sinovac vaccine or/and secure new vaccines to manufacture.

The securities firm has a ‘Sell’ recommendation on Pharmaniaga with a target price of 63 sen based on 20.9 times financial year 2022 forecast earnings per share of 3 sen.