Hyphen Pharma International - SAC Capital 2022-05-17: Sterling 1Q22 Backed By Re-Opening Tailwind

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HYPHENS PHARMA INTL LIMITED (SGX:1J5)

Hyphen Pharma International - Sterling 1Q22 Backed By Re-Opening Tailwind

• Hyphens Pharma (SGX:1J5) turned in +18.5% y-o-y revenue growth to S$39.2m, of which Novem, which was acquired at end 2021, contributed S$3.5m (or 8.9% of total revenue).
• Hyphens Pharma’s core revenue rose 7.9% y-o-y. Demand for specialty drugs (+24.4% y-o-y) and proprietary products (+12.8% y-o-y) normalized in 1Q, as elective healthcare treatments resumed following the relaxation of COVID controls in Asia. Vietnam, in particular, recorded strong sales in March from hospital tenders.

Hyphen's 1Q22 gross profit rose 23.9% to S$15m

• Hyphens Pharma's gross profit rose 23.9% to S$15m, due to
  1. Novem’s stronger margin as it sells mainly through the institutional channels;
  2. better product mix with higher-margin specialty drugs gaining revenue share;
  3. a weaker Euro (-5% vs S$), in which most of its purchases are denominated in.
• As a result, gross margin rose 1.7 ppt to 38.4%. Net profit gained 49.7% y-o-y to S$3.2m.
• Although Hyphens Pharma raised prices for some products in April, we expect an easing in gross margins in the next three quarters due to:
  1. supply chain bottleneck. The lead time for procurement has lengthened. Some products are out of stock as suppliers face difficulties in securing raw materials. The longer lead time will raise working capital requirements;
  2. higher procurement costs as suppliers pass on higher raw material prices;
  3. higher selling prices might dampen consumers’ demand, especially for discretionary products.

Maintain BUY

• We maintain our FY22E revenue and net profit forecast for Hyphens Pharma, but there is upside risk to our projections if the supply situation in Europe improves.
• Hyphens Pharma's share trades at FY22E 4.9x EV/EBITDA and 1.5x P/B. We expect the balance sheet to remain in net cash position.
• Maintain BUY call on Hyphens Pharma with target price of S$0.40.
• See
  • Hyphens Pharma's Share Price,
  • Hyphens Pharma's Target Price,
  • Hyphens Pharma's Analyst Reports,
  • Hyphens Pharma's Dividend History,
  • Hyphens Pharma's Announcements,
  • Hyphens Pharma's Latest News.

Peggy Mak SAC Capital Research | https://www.saccapital.com.sg/ 2022-05-17

SGX Stock Analyst Report BUY MAINTAIN BUY 0.400 SAME 0.400