DPHARMA: Strong Earnings Beat Expectations on Strategic Efficiencies, Positive Outlook Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading pharmaceutical company has reported a significant overperformance in its nine-month financial results, with net profit for 9M25 reaching RM68.4 million. This figure comfortably surpassed the total net profit of RM62.6 million recorded for the entire financial year 2024, signaling robust operational strength.
The impressive financial performance was primarily attributed to higher sales across all business segments, benefiting from a stronger Ringgit and favorable Active Pharmaceutical Ingredient (API) prices. These factors collectively contributed to enhanced profitability during the period.
Performance Overview
While 9M25 demonstrated strong growth, the company anticipates a slight quarter-on-quarter softening in performance for 4Q25. This expected moderation is due to the government ceasing new orders in December 2025. However, management expects this impact to be partially mitigated by increased sales to the private sector, showcasing the company’s diversified revenue streams.
Strategic Initiatives and Future Growth
Looking ahead, earnings are projected to remain resilient and expand further, reaching RM100.2 million in FY26. This growth is expected to be underpinned by the continuation of the same positive drivers observed in 9M25.
The year 2026 also marks the final year of the current Approved Products Purchase List (APPL) contract, which has a total value of approximately RM684.2 million until December 31, 2026. Historically, demand from the government sector tends to peak in the final year of such contracts, suggesting a potential uplift in sales.
Moreover, the company is actively pursuing a new Ministry of Health (MOH) contract for human insulin products, valued at over RM400 million spanning the next three years. The award of this contract is anticipated once a second supplier is ready, aligning with the MOH’s policy requiring a minimum of two suppliers.
Insulin contributions are expected to rise in FY25, partly due to a one-off surge of approximately RM35 million to fulfill outstanding orders. For FY26, insulin is estimated to account for approximately 9% of the group’s revenue, a slight decrease from an estimated 12% in FY25, as the one-off orders normalize.
In a strategic move to enhance supply security for the Malaysian market, the company plans to undertake fill-and-finish activities for human insulin on behalf of Biocon. The dedicated facility, located on the fourth floor of the K2 plant, is projected to take approximately three years to complete.
Currency Tailwinds
The company is also poised to benefit from a stronger Ringgit, which has appreciated by 3% year-to-date against the US Dollar to RM3.93/USD. The existing APPL contract is priced at a more favorable exchange rate of RM4.70/USD. Furthermore, 50-60% of the company’s costs are denominated in USD, primarily for Active Pharmaceutical Ingredients. A sensitivity analysis suggests that every 5% depreciation of the USD against the Ringgit could translate into an estimated 4.9% uplift in earnings, highlighting a significant currency tailwind.
Based on this positive outlook and strong performance, TA SECURITIES maintains a BUY recommendation on the stock, raising its target price to RM0.25, representing a 25.0% upside from its last traded price of RM0.20.
