UMC’s capacity likely to double by the end of the year

Jan 12, 2024 | Bursa Malaysia, News | 0 comments

PETALING JAYA: UMediC Group Bhd (UMC) will see its capacity doubling by the end of the year, with its new plant up and running, according to Phillip Capital Research.

The newly constructed plant is adjacent to the company’s existing factory and it started operations last December.

“This new facility will see capacity doubling by the end of 2024. The expansion will be implemented in phases, with 40% scheduled to start up by the first half of 2024 (1H24) followed by the remaining 60% in 2H24.

“UMC also plans to relocate its existing storage to the new facility with the existing factory focusing on clean room and manufacturing processes,” Phillip Capital said in a note to clients yesterday.

UMC is involved in marketing, distribution and manufacturing of medical devices.

Reaffirming its positive outlook on UMC for 2024, the research firm said UMC’s management is also positive about the demand of two new products being rolled out.

One is the prefilled nebulizer, which started production last December. The second new product is the sterile water inhalation, which is scheduled to be launched in 1Q24.

“We expect the demand for the new products to drive the strong earnings growth inFY25.

“In terms of new marketing and distribution channels, UMC is actively exploring new locations in Kuala Lumpur and Johor to showcase its medical devices,” said the research house.

On the company’s 2Q24 results, which is slated to be announced in March, Phillip Capital expects earnings to recover sequentially on the back of higher sales and normalization of its marketing costs.

“Recall that 1Q24 margin and profit were impacted by the higher marketing costs and increased administrative expenses as UMC hired additional workers to cater for the new facility.

“With the absence of the lumpy marketing costs incurred last quarter, we expect the earnings before interest, taxes, depreciation, and amortization margin to show sequential improvement in the upcoming quarter,” said the research house.

It maintained a “buy” rating on the stock with a target price of 87 sen, which is pegged at 25 times price-to-earnings multiple.