DPHARMA: Earnings Surpass Expectations Driven by Cost Controls, Positive Outlook Affirmed

The company reported a solid financial performance for the nine months ended 9M25, with net profit aligning with both internal and consensus expectations. The robust results were underpinned by significant year-on-year growth in both revenue and profit before tax (PBT).

Performance Review

For 9M25, net profit reached RM68.4 million, representing 72.9% and 73.7% of the full-year estimates by the investment bank and market consensus, respectively. This marked a substantial 43.8% year-on-year increase in net profit, while revenue grew 14.0% to RM707 million. The growth was attributed to stronger sales across all business segments and a notable, one-off surge in insulin demand during the second quarter of 2025 (2Q25).

Profitability saw a healthy boost, with the PBT margin expanding by 2.6 percentage points to 12.7%. This improvement was primarily driven by a combination of lower Active Pharmaceutical Ingredient (API) prices and a strengthening Ringgit. Local sales remained the dominant revenue contributor, accounting for 93.8% of the group’s total revenue, with exports making up the remaining 6.2%.

On a quarter-on-quarter basis, 3Q25 PBT increased by 11.7% to RM29.7 million, despite sales only marginally rising by 0.3% to RM222.5 million. The enhanced performance in the third quarter was further bolstered by the strengthening of the Ringgit and a more favorable product mix.

Future Outlook

The investment bank maintains its earnings estimates for FY25-27, anticipating continued positive momentum. The group’s growth trajectory is expected to be reinforced by the 2.7% increase in funding allocated to the Ministry of Health (MOH) in Budget 2026 and the broader initiatives outlined in the 13th Malaysia Plan, particularly given the growing demand for generic medicines.

Addressing a key contractual development, the company’s recombinant human insulin contract, which accounted for 8-10% of FY24 revenue, expired on October 28, 2025. Management is actively pursuing a new MOH tender to continue its insulin supply, with the investment bank expressing confidence that the group will successfully secure the new contract.

Recommendation and Valuation

Based on the strong performance and positive outlook, the investment bank reiterates its BUY recommendation. The target price remains at RM1.70 per share, derived from a 16.0x CY26 EPS (Earnings Per Share) multiple and a 3% ESG (Environmental, Social, and Governance) premium.