UMC: Medical Device Manufacturer Eyes Stronger Margins and Expanded Markets
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
An analysis from TA SECURITIES maintains a “BUY” recommendation for a prominent medical device manufacturer, projecting significant growth driven by capacity expansion, cost efficiencies, and strategic market penetration. The investment bank has set a target price of RM0.25, suggesting a potential upside of 25.0% from the last traded price of RM0.20.
Performance & Operational Expansion
The manufacturing segment is poised for robust growth, with gross profit (GP) margins for Hydrox and Airdrox products currently ranging between 20-25%. This is anticipated to improve towards 30% as plant utilisation ramps up. The company’s production capacity is on track to double to 12 million units per year by the first quarter of financial year 2026 (1QFY26). A new Water-for-Injection (WFI) system, currently in its final testing phase and expected to be completed by November 2025, is central to reducing sterilisation costs, eliminating outsourcing, and enhancing the ability to produce EU/US-compliant, higher-quality products. On the export front, the manufacturer has initiated explorations into the Australian inhaler market and plans further entries into Latin America.
Distribution & New Ventures
The distribution segment, particularly its Patho Solutions unit, which accounts for approximately 30% of distribution revenue, is set for double-digit growth. This growth is expected to be fueled by lab-focused solutions and potential exclusive distributorships, aligning with Malaysia’s expanding private hospital sector. The company’s reagent business is also highlighted for its sticky, recurring revenue. Furthermore, the manufacturer’s ambulance unit, Rescue Medic Sdn Bhd, is strategically eyeing a significant government tender for 925 ambulances across six zones, valued at approximately RM444 million, with a guided GP margin of 15-20%. While this unit is expected to contribute to long-term earnings, its near-term impact remains minimal, with only one ambulance currently operational.
Investment Outlook
TA SECURITIES reiterates its “BUY” rating, citing the manufacturing segment’s strong growth trajectory, driven by capacity doubling and robust global demand, alongside a healthy pipeline of new products expected to broaden revenue streams. Despite these positive indicators, potential downside risks include a slowdown in demand for medical equipment and operational disruptions. The unchanged target price of RM0.25 reflects confidence in the company’s ability to execute its growth strategies.
