CIMB Investment Bank Bhd (CIMB Securities) maintained its BUY call on Duopharma Biotech Bhd with an unchanged target price of RM1.83, implying 50% upside from RM1.22, after the pharmaceutical company secured six-month extensions for its Approved Products Purchase List (APPL) supply agreements with the Ministry of Health (MOH).
The agreements, originally due to expire in December 2026, will now run from January to June 2027 or until another date directed by the MOH. CIMB said the extension was within its projections and provides longer-term earnings visibility, although the pricing structure remains unchanged from the terms agreed in April 2024.
Duopharma will supply 97 pharmaceutical products under the extended contracts, down from 100 previously. CIMB estimates the removal of three products will have minimal impact, with revenue loss expected at below RM1 million. APPL products account for about 22% of the group’s annual revenue.
The research house said the stronger ringgit could offer some relief to procurement costs and partly offset higher active pharmaceutical ingredient prices. Duopharma may also mitigate margin pressure by passing higher costs to its private sector customers, where pricing flexibility is greater.
CIMB made no changes to its earnings forecasts, noting that a prolonged extension could pressure margins if raw material costs remain elevated and the ringgit weakens against the US dollar.
