Analysts upbeat on UMediC Group

PETALING JAYA: Analysts remain optimistic on UMediC Group Bhd’s (UMC) performance for the coming quarters, supported by its new plant capacity as well as the increase in public healthcare expenditure by the government.

“Our optimism towards UMC remains intact, fuelled by its robust capacity expansion and strategic advantage in capitalising on the government’s commitment to increase public healthcare to 5% of the gross domestic product,” Hong Leong Investment Bank (HLIB) Research said.

According to HLIB Research, UMCs relocation of its warehouse to the new plant paved the way for the group to expand its manufacturing capacity.

The new HydroX production capacity is set to increase from 300,000 bottles per month to about 420,000 bottles per month, signifying a 40% increase, before reaching its target of 600,000 bottles per month by December 2024.

HLIB Research noted that the government’s increase in allocation to the Ministry of Health, coupled with brownfield expansion among private hospitals, will support the demand outlook for medical devices as it remains bright.

“Hence, we expect a quarter-on-quarter improvement in both revenue and bottom-line,” HLIB Research added.

However, on its financials, HLIB Research said UMC missed expectations as its results for the third quarter of financial year 2024 (3Q24) came below the research house’s and consensus’ expectations by 58% and 56%, respectively.

For 3Q24 ended April 30, 2024, UMC recorded a drop in net profit by 22.21% year-on-year (y-o-y) to RM1.58mil, reflecting a basic earnings per share of 0.42 sen per share, as compared to RM2.03mil in the same quarter of the previous year.

On the other hand, UMCs revenue witnessed a 21.96% y-o-y hike to RM11.69mil for 3Q24, in which was noted to be lifted by its marketing and distribution and manufacturing segment.

Also sharing the same view, Phillip Capital Research said UMC’s earnings shortfall was due to weaker-than-expected sales, professional fees for main market listing as well as higher effective tax rates resulting from non-deductible transfer listing expenses incurred.

“UMC’s 9M24 core net profit of RM7mil fell short of ours and consensus expectations, representing 59% and 56% of respective forecasts,” the research house stated.

“Following the weak results, we cut our financial year 2024 (FY24) to FY26 earnings per share forecast by 19% to 27% to account for slower-than-expected sales order in FY24 and lower margin expectations.”

On a brighter note, Phillip Capital Research said it remains positive on UMC’s FY25 earnings prospects and maintained a “buy” call on the group with a lower 12-month target price of 85 sen.