UG Healthcare - OBM Model Bears Fruit
- UG Healthcare (SGX:8K7) reported 3QFY6/22 net profit of S$10.7m (+0.3% q-o-q, -69% y-o-y), in line with our expectations, with 9M22 net profit making up 75% of our FY22 forecast. While ASPs continued to trend downwards, revenue rose 12% q-o-q in 3Q22 helped by higher sales volume of ~15% q-o-q during the quarter. This was mainly due to recovery of its manufacturing operations to optimal utilisation level (previously impacted by COVID-related shutdown and lower mandated workforce capacity).
- Thanks to its OBM business model, UG Healthcare has been able to navigate challenges in the glove manufacturing industry, where ASPs have been on a decline for the past year due to intensified competition resulting from higher industry supply.
- UG Healthcare’s new capacity will be commissioned gradually from May 22 onwards. However, labour shortage may be a constraint on the pace of production ramp, hence we cut our FY22F earnings per share forecast by 7.1% on lower volume assumption.
- Reiterate ADD call on UG Healthcare. Our target price of S$0.42 is based on 11.2x CY23F P/E (30% discount to the glove sector’s historical mean).
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-05-20 2022-05-20
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