Beneficiary of vaccine rollouts in 1H22F
? 4Q21 core EPS & DPS were a strong beat due to vaccine and L&D earnings.
? We think 1H22F earnings will still be supported by sale of c.4.5m SV doses.
? Reiterate Add with lower RM0.90 TP. PHRM is our top pharmaceutical pick.
Record 4Q21 core EPS & DPS beat expectations…
Pharmaniaga’s (PHRM) 4Q21 core net profit (NP) spiked 21.6x yoy to a record RM102m, driven by better manufacturing and logistics & distribution (L&D) earnings. Qoq, core NP jumped 81.6%, as higher margin more than offset lower revenue. FY21 results substantially beat our expectations again, with core EPS surpassing our/Bloomberg consensus forecasts by 78%/81%, on stronger-than-expected manufacturing and L&D profits. 4Q21 interim DPS of 5 sen (6.6% yield based on current share price; ex-date: 7 Mar 2022) brings FY21 DPS to 9.3 sen (71% payout), also above our projected 6 sen (70% payout).
…driven by robust Sinovac Covid-19 vaccine and L&D earnings
4Q21 external manufacturing revenue continued to surge to RM33m (4Q20: RM0.2m) due to the contribution from the supply of filled-and-finished Sinovac Covid-19 vaccine (SV) to the private sector. PHRM supplied c.0.5m doses in 4Q21 (lower than our assumed 2m doses), implying an average selling price (ASP) of c.RM60/dose (in line with our assumption). 4Q21 external manufacturing revenue tanked qoq to RM33m from 3Q21’s RM1.3bn, after the peak of the national vaccination drive in 3Q. Hence, manufacturing PAT spiked to RM49m (4Q20: RM0.4m), while it fell by a more moderate 11.5% qoq, thanks to lower selling & distribution/other costs. Higher margins also led to a turnaround in L&D PAT to a sizeable RM37m (4Q20: -RM2m, 3Q21: -RM7m).
1H22F to still be buoyed by vaccine sales; concession extended
We raise PHRM’s SV sales volume assumption in 1H22F to c.4.5m doses (previous: 3m) to the private sector, Ministry of Health (MOH; under the National Covid-19 Immunisation Programme, from mid-Feb) and potentially export markets. Thus, based on unchanged ASP of c.RM60/dose, we bake in RM270m SV revenue contribution in FY22F (previous: c.RM190m), and estimate c.RM22m-27m PAT contribution (assuming 8-10% margin; 24- 30% of FY22F net profit). We have not assumed more SV sales from 2H22F, pending potential new supply agreements. Meanwhile, MOH’s in-principle extension of PHRM’s concession for 10 years (from Jan 22) is in line with our expectations and bodes well for L&D revenue (67% of FY22F total), though the agreement terms have yet to be finalised.
Reiterate Add with a lower TP of RM0.90
We raise FY22F core EPS by 37% to factor in higher SV contribution, and cut FY23F by 11% due to housekeeping. Post-FY23F earnings cut, we lower our TP to RM0.90, still based on CY23F P/E of 19x (roughly 1 s.d. above 5-year mean, to reflect potentially higher SV earnings contribution). Reiterate Add as we see PHRM as a beneficiary of the ongoing Covid-19 vaccine rollouts in Malaysia and regionally. Key re-rating catalysts/downside risks: higher/lower-than-expected SV contribution and concession margins.