Distribution division to affect UMedic's profitability
UMedic is involved in the marketing and distribution of branded medical and consumable devices, as well as the development, manufacturing and marketing of own brand medical consumables.
In the third quarter ended April 30, 2025 (3Q25), it posted a profit after tax and minority interest (Patmi) of RM1.8mil.
This result was below the consensus of research firms.
Nine-month Patmi stood at RM5.4mil, down close to 20% year-on-year.
According to Hong Leong Investment Bank (HLIB) Research, the negative deviation was mainly due to lower-than-expected revenue at UMedic's distribution division due to the lower appetite for medical devices and consumables.
'As such, we cut the FY25-FY27 profit forecasts by 10%/12%/11% respectively to reflect lower revenue assumption for its distribution division.
'Following three consecutive quarters of earnings underperformance, we have also decided to downgrade the stock to a 'hold' from a 'buy' with a lower target price of 43 sen from 69 sen before,' HLIB Research said in a report.
On the other hand, the manufacturing division saw a strong rebound from the previous quarter, mainly supported by demand for respiratory-related products.
'Going forward, we believe the sales volume of respiratory products within the manufacturing division will be supported by global healthcare megatrends, particularly the growing ageing population.
'However, this positive outlook may be partially offset by ongoing uncertainty at the distribution division,' added the research firm.
It said its revised 43 sen target price is based on a lower price-earnings multiple of 19 times, which is minus two standard deviations below its three-year mean.
'This is down from our previous valuation of 26.5 times average against its reduced 2026 earnings per share of 2.3 sen from 2.6 sen before. The lower valuation multiple reflects the series of profit disappointments and our more cautious outlook going forward,' said the research firm.
Shares of UMedic were trading at 40 sen at the time of writing, down more than one-third since the start of the year.
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