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CGS-CIMB sees decent earnings growth for Pharmaniaga, reiterates ‘add’ call
KUALA LUMPUR, June 28 — CGS-CIMB Securities Sdn Bhd (CGS-CIMB) is positive on Pharmaniaga Bhd (Pharmaniaga) on the expectation of a decent financial year 2023-2024 (FY23-24) earnings growth for the company.
The outlook is underpinned by the ample excess capacity at the company's existing plants and consumer healthcare expansion, the brokerage said in a research note today.
“The ample excess production capacity at Pharmaniaga’s existing plants will allow it to ramp up output in the next three to five years — in light of rising pharmaceutical demand and new product launches — with little to no incremental capital expenditure, thus potentially leading to better economies of scale and margins,” it said.
Meanwhile, it noted that Pharmaniaga’s new 10-year logistics and distribution government concession agreement — to be inked by year-end — will include a more stringent maximum delivery timeframe of five working days for medicines, compared to the current seven days, with monetary penalties imposed for non-compliance.
“Nonetheless, the company does not foresee any major challenges complying with the new requirements as it currently delivers within four days, on average,” said CGS-CIMB.
As such, the research firm reiterated its 'add' call for Pharmaniaga, but with a lower target price of 73 sen from 79 sen previously.
At 11am, the company's share price was flat at 60 sen with 117,900 shares traded. — Bernama