Unfazed by Sinopharm vaccine ceiling price
? The government has set a wholesale ceiling price of RM49/dose for private market sales of the Sinopharm Covid-19 vaccine, effective from 15 Jan 2022.
? While lower vs. DBB’s selling prices, the earnings impact should be minimal.
? Reiterate Hold with unchanged TP of RM1.60 (18x FY23F P/E).
Government sets ceiling price for Sinopharm Covid-19 vaccine…
The government announced yesterday that a ceiling price will be imposed on the sale of the Sinopharm (Covilo) Covid-19 vaccine to the private market, effective from 15 Jan 2022. The wholesale price for the vaccine will be capped at RM49 per dose while its retail price cap will be RM61 per dose, excluding the cost of services and disposables used in the injection of the vaccine. The new price caps, which were generally determined based on the import price and current market price, will be implemented by the Pharmacy Enforcement Division under the Ministry of Health (MOH), under the Price Control and Anti-Profiteering Act 2011. Health Minister Khairy Jamaluddin and Domestic Trade & Consumer Affairs Minister Alexander Nanta Linggi said this move was undertaken as prices for Covid-19 vaccines in the private market are high and fluctuating, adding that the list and prices of the vaccines will be continuously reviewed and improved or eliminated based on current market conditions and demand.
… which is likely to have a minimal impact on FY22F earnings
While the government had on 26 Nov said that it would make a subsequent announcement on the price cap for Covid-19 vaccine booster doses sold by the private sector, this development comes as a negative surprise as the wholesale ceiling price of RM49 per dose for the Sinopharm vaccine is substantially lower than DBB’s current average selling price to the private market, which we gather has been slightly below RM100. Hence, we cut FY22F revenue/core EPS by 4.3%/2.0%, as we slash our average selling price assumption for the vaccine sales to RM49 per dose (previous: c.RM85). We keep our sales volume projections of c.50k/950k doses intact for the vaccine in FY21F/22F, following our latest checks with management. We now forecast revenue contribution of RM47m from the vaccine supply in FY22F (previous: RM80m), based on the new ceiling price, with minimal net profit contribution of <RM1m (previous: c.RM1m) due to the very thin margins (<1% vs. 1.5% previously, in our view). We have assumed that DBB does not procure any further vaccine doses from Sinopharm.
Reiterate Hold with unchanged TP of RM1.60 (18x FY23F P/E)
Post the earnings revision, we now estimate core EPS was stable yoy in FY21F (as higher revenue is offset by higher costs and depreciation), before rising 6.3%/9.1% yoy in FY22F/23F on the back of healthy revenue growth and cost controls. As our earnings cut is confined to FY22F, we reiterate Hold on DBB with an unchanged TP of RM1.60, still based on 18x FY23F P/E (in line with its 5-year mean). Key upside/downside risks: stronger-/weaker-than-expected pharma sales, lower/higher input costs.