Analysts mixed on Pharmaniaga’s forecast

This causes most analysts to bring down the pharmaceutical company’s TP to be within the range of 83 sen to 87 sen


PHARMANIAGA Bhd, which saw a sharp decline in its second quarter of 2022’s earnings by 94.7% to RM722,000, has received mixed views from analysts.

MIDF Research said the pharmaceutical’s cumulative earnings for the first half of 2022 (1H22) came in below MIDF expectations at 30% of its yearly earnings estimates, and at 52% of consensus.

However, MIDF maintained its ‘Buy’ call on Pharmaniaga with the revised target price (TP) of 87 sen from 97 sen based on pegging a price-earnings ratio of 14 times to the revised earnings per share of 6.3 sen.

“Despite the lower net profit in the reporting quarter due to extensive employment and marketing expenses, as well as mellowed Covid-19 vaccine request locally and regionally, gross profit had seen an increase in comparison to a year prior, indicating a positive trajectory to its operations,” it said in a research note yesterday.

MIDF foresees that the group’s marketing strategies are expected to continue another three to five years, with an estimated investment budget of RM10 million to RM15 million per annum. 

“The group is also planning to tender at least 40 new products with the Health Ministry, which will be finalised by end-year,” it said.

Meanwhile, Pharmaniaga’s vaccine sales can proceed to carry value in the group’s orderbook as most of its fill-finish vaccines have an expiry date of up to 2H24. 

“The group reported that it will be discussing further distribution plans to Africa for its vaccines and other consumables,” it noted.

On top of that, the group is aggressively hiring new marketing staff while pushing for more initiatives to make its brands more known while demand for said products are high.

“We believe its move to invest in a proper marketing plan would greatly benefit its operations in the long run, as well as its initiatives in establishing its own brand of pharmaceuticals as household names, digitalisation of product distribution and sales, long-term efficient cost management in its logistics and manufacturing segments, and halal vaccines, consumables and biopharmaceuticals,” it added.

On the other hand, Hong Leong Investment Bank (HLIB) Research downgraded Pharmaniaga to ‘Hold’ from ‘Buy’ and cut its TP to 63 sen from 83 sen. 

“We lower our earnings forecast for the financial year 2022 (FY22) to FY24 by 15% to 26% as we impute higher staff costs and higher advertising and promotion (A&P) cost into our assumptions,” HLIB analyst Sophie Chua Siu Li said.

The analyst opined that the increase in A&P spending would adversely impact the group’s margins in the short- to the medium-term although it is essential for Pharmaniaga to boost the brand recognition of their consumer healthcare and over-the-counter products.