KUALA LUMPUR: UMediC Group Bhd's (UMC) second quarter ended Jan 31, 2024 (2QFY24) results came in below Hong Leong Investment Bank's (HLIB Research) and the street's expectations.
The negative deviation was due to higher-than-expected operating costs and tax expenses, HLIB Research said in a note.
The company's core profit after tax and minority interest (Patami) reached RM2.8 million, marking a significant increase of 56.7 per cent quarter-on-quarter (QoQ) and a modest rise of 1.7 per cent year-on-year (YoY).
This brings the total for the first half of financial year 2024 (1HFY24) to RM4.7 million, showing a two per cent increase compared to the same period last year.
UMC's 1HFY24 core Patami was arrived at after adjusting for one-offs (mainly professional fees in relation to its special issue and Main Market transfer) amounting to RM300,000 million.
HLIB Research has maintained its "buy" call on UMC, with a lower target price of RM0.91.
However, the investment bank has cut its FY24–FY26 forecasts by seven to ten per cent as it raises its operating costs and tax assumptions.
"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 expenditure to five per cent of gross domestic product (GDP)," it noted.
Meanwhile, HLIB Research also said that having secured the necessary approvals, UMC has relocated its warehouse to the new plant, making way for its manufacturing capacity expansion.
It added that UMC's production capacity is set to increase by 40 per cent to approximately 420,000 bottles per month by April 2024 before reaching 600,000 bottles per month by December 2024.