Analysts are remaining positive on Hyphens Pharma as the pharmaceutical and consumer healthcare group reported a net profit of $8.6 million for the FY2023 ended Dec 31, 2023.
CGS International analyst Tay Wee Kuang has kept his “add” call as the group’s earnings stood above his expectations at 107.3% of his full-year estimate. The outperformance comes as Hyphens Pharma’s sales hit a record-high in the 4QFY2023.
“We think Hyphens Pharma also benefitted from revenue contribution from new products added to its portfolio, such as infant care products from Laboratoires Gilbert S.A.S., for which [the group] took over distributorship (as of 2H2023) in countries where the brand has an existing sales presence,” says Tay in his March 13 report.
The group’s establishment of new distribution channels for its portfolio of products may also boost its sales volumes, the analyst adds.
“Hyphens Pharma continues to make headway in establishing new distribution channels for its portfolio of products, such as its recent (Feb 24) partnership with 7-Eleven Singapore to sell its Ocean Health supplements in selected 7-Eleven stores in Singapore and the signing of an exclusive distribution agreement with leading Moroccan pharmaceutical company Cooper Pharma to distribute its range of Ceradan skincare products in five Middle East countries (i.e. Saudi Arabia, United Arab Emirates, Kuwait, Qatar and Bahrain),” Tay writes.
Despite the lower gross profit margin (GPM) in the 2HFY2023 due to higher cost pass-through from its brand principals, Hyphens Pharma says it will be looking to optimise its sales mix via efforts. This includes focusing on its medical aesthetics portfolio in order to drive margin expansion.
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On this, Tay has increased his earnings per share (EPS) estimates for the FY2024 and FY2025 by 1.2% and 4% respectively due to stronger revenue growth that is partly offset by weaker GPMs. As a result, his target price is lifted to 35 cents from 32 cents previously.
He also continues to like the group as he believes it will continue to see incremental benefits from its expanded product portfolio.
PhillipCapital analyst Paul Chew has also kept his “buy” call on Hyphens Pharma as its FY2023 earnings also stood above his expectations at 106% of his full-year forecast.
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“Other markets, such as Indonesia and the Philippines, grew faster than expected due to the maiden contribution from Laboratoires Gilbert S.A.S exports,” Chew writes.
While Chew is positive on the rebound in the group’s revenue for specialty pharma, he is concerned over the weaker gross margins and higher operating expenses (opex).
“Ebitda margins declined 1.5% points YoY to 8.3% in 2HFY2023. We believe a combination of higher export sales, an increase in headcount costs and additional expenses from DocMed drove down margins,” he notes in his March 14 report.
That said, he still expects Hyphens Pharma’s overall earnings to recover amid the normalising supply chain for specialty products from Europe.
“Other growth drivers for Hyphens include aggressively expanding the number of principals for its specialty products, exporting to new markets, and stock-keeping units (SKU) extensions of its proprietary brands. Additional costs by DocMed are also at a more gradual pace,” Chew writes.
Chew has kept his target price unchanged at 35 cents. At Hyphens Pharma’s last-closed price of 28 cents, the group has a dividend yield of 4% and is trading at a P/E ratio of 7 times its FY2024 estimates.
As at 1.14pm, shares in Hyphens Pharma are trading 0.5 cents higher or 1.79% up at 28.5 cents.
