RHB Bullish On Duaopharma

RHB Research has maintained BUY recommendation on Duopharma Biotech Bhd’s and DCF-derived MYR1.92 TP, 20% upside, and c.3% yield.

It said that price caps on private vaccine sales have been announced, and this may result in an unfavorable knee-jerk price performance.

It said that it believes the focus should be on Duopharma’s core business, where its growth trajectory is fundamentally intact.

After months of deliberation, the Government has set a ceiling price for private sales of COVID-19 vaccines. For vaccines from Sinopharm, the wholesale ceiling price is fixed at MYR48.00/dose, while the retail price is set at MYR61.00/dose.

The price cap is set to take effect on 15 Jan 2022. The vaccine price list will continue to be assessed and increased or dropped, based on market conditions.

It said that ignoring the vaccine news flow, we believe investors’ focus should remain on its core business. Notably, its human insulin contract with the Ministry of Health was renewed, with an annual revenue contribution of RM125million (+34% compared to the previous contract).

It is said that DBB is also during a technology transfer of a second product in its HAPI plant. Oncology medicine is aimed at treating chronic myeloid leukemia.

It said that while the company has been distributing the product locally, it will be able to benefit from the higher manufacturing margins, and its decision to manufacture smaller-sized tablets than its originator should boost patient adherence rates.

It said that DBB is also expected to benefit from MYR10m in investment tax allowance for FY22F, arising from the construction of its K3 plant.

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