Pharmaniaga Bhd’s first-half financial performance for FY2026 (1HFY26) came in above expectations, supported by stronger contributions from its medical supply business and higher demand for generic medicines from government hospitals.
Kenanga Research said Pharmaniaga’s profit after tax and minority interest (PATAMI) rose 31% year-on-year to RM44 million in 1HFY26, representing 66% of its full-year forecast and 48% of consensus expectations.
The research house said the stronger-than-expected performance was driven by higher delivery volumes of generic drugs to government hospitals, stronger contributions from the medical supply unit and the addition of new products to the Approved Products Purchase List (APPL).
However, Kenanga noted that Pharmaniaga’s earnings are typically seasonally weaker in the second half, with the fourth quarter usually being the slowest due to reduced public-sector purchases around the year-end holiday period.
The group declared a second interim dividend of 0.48 sen per share, bringing its total interim dividend for 1HFY26 to 1.73 sen, above Kenanga’s expectations.
On a quarter-on-quarter basis, Pharmaniaga’s second-quarter FY2026 revenue declined 12%, mainly due to a high base in 1QFY26 when the group experienced a surge in government hospital orders following the typically slower year-end holiday period.
Revenue from the medical supply unit fell 17% QoQ, although this was partly offset by a 13% increase in manufacturing output.
Core net profit in 2QFY26 fell 60% QoQ to RM12.5 million, reflecting the high base in the preceding quarter as well as the festive season and timing of government hospital purchases.
On a year-on-year basis, however, 1HFY26 revenue increased 12%, driven by a 23% increase in manufacturing sales and an 18% rise in medical supply revenue. This more than offset a 5% decline in the group’s Indonesia operations.
Kenanga estimated that order volumes from government hospitals increased by more than 8%, while the number of products listed under the APPL expanded by more than 830 products.
Looking ahead, Kenanga said the biopharmaceutical segment is expected to become one of Pharmaniaga’s key strategic growth pillars.
The group has secured its first major human insulin supply contract worth RM281.7 million over more than three years, marking an important milestone in the commercialisation of its biopharmaceutical operations.
The contract is expected to begin contributing from 2HFY26, which has already been incorporated into Kenanga’s forecasts.
Pharmaniaga is also targeting upcoming CY2028 tenders for insulin analogues, including Glargine and Aspart, as well as anti-obesity drugs.
The group is additionally working towards obtaining halal certification for its insulin products, while progressing its product pipeline from human insulin towards higher-value insulin analogues and subsequently anti-obesity medicines.
Kenanga said this progression would be important in establishing a sustainable long-term biopharmaceutical product pipeline.
Separately, Pharmaniaga has completed process validation batches for its PCV13 pneumococcal vaccine, with its manufacturing facilities having undergone inspection by the National Pharmaceutical Regulatory Agency (NPRA).
The development represents another milestone towards the group’s targeted localisation of vaccine manufacturing by CY2027.
Following the stronger-than-expected volume sales, Kenanga raised its FY2026 net profit forecast by 11%, while leaving its FY2027 earnings estimates unchanged.
The research house maintained its RM1.15 target price based on an unchanged 18 times FY2027 earnings per share (EPS) multiple.
Kenanga said the premium valuation relative to peers reflects Pharmaniaga’s efforts to move up the value chain by increasing its focus on higher-margin biopharmaceutical manufacturing.
However, the stock is already trading at relatively rich valuations of approximately 21 times FY2026 EPS and 19 times FY2027 EPS, compared with its estimated average net profit growth of around 21% annually.
