KUALA LUMPUR (Aug 18): Analysts have upgraded Duopharma Biotech Bhd to "buy" as they foresee earnings boost from its Sinopharm vaccine deal.

UOB Kayhian’s analyst Philip Wong said in a note today he expects Duopharma’s conditional registration of its Covid-19 Sinopharm vaccine and its attributed contribution in the second half to shore up the group’s earnings for the year.

“Going forward, Duopharma’s Sinopharm Covid-19 vaccine is expected to contribute RM50 million in revenue on an annual basis. We assume this will be a replacement of its earlier intended distribution of the Sputnik V vaccine,” he said.

He upgraded the stock to "buy" with a target price (TP) of RM2.90 as he expects the eventual rollout of the Sinopharm vaccine to catalyse interest while offering robust organic growth going forward.

Wong also said the group’s results for the second quarter ended June 30, 2021 (2QFY21) were within expectations.

TA Securities analyst Tan Kong Jin also said he expects Duopharma to secure some orders for the Sinopharm vaccine in the near term.

“Assuming Duopharma sells 1.5 million doses to the private sector at RM90 each, this will boost the group’s FY21 revenue projection by RM135 million,” said Tan.

In terms of profit, Tan expects the potential earnings contribution to be at circa RM6.75 million for 2021, assuming profit after tax margin of 5%.

Tan, however, maintained the group’s FY21 to FY23 earnings estimates, after the group’s net profit for the first half ended June 30, 2021 (1HFY21) came in within his expectation.

He also maintained his TP for Duopharma of RM2.82 per share based on an unchanged price to earnings (P/E) of 26 times of 2022 earnings per share.

However, he upgraded Duopharma to "buy" from "sell" previously given that the share price has dropped by 21.7% year to date.

Meanwhile, CGS-CIMB’s analyst Syazwan Aiman Sobri said he expects meaningful contributions to Duopharma to arise from the supply of the Sinopharm Covid-19 vaccine to the private sector in 2HFY21.

However, he retained an "add" call on the stock with a lower TP of RM3.16, still based on 2022 P/E of 28.8 times, taking into account potential long-term earnings prospects from the development of vaccine manufacturing capabilities.

According to him, the Drug Control Authority approval of the Sputnik V Covid-19 vaccine and subsequent execution of the government supply agreement is a key near-term rerating catalyst.

He also said the group’s 1HFY21 core net profit growth of 3.1% year-on-year was in line with his expectations.

At noon break, Duopharma fell eight sen or 3.21% to RM2.41, valuing the group at RM1.76 billion.

The counter has fallen 26.97% from its recent peak of RM3.30 on May 31.