KUALA LUMPUR (May 11): Pharmaniaga Bhd (KL:PHARMA) could resume dividend payments after exiting PN17 status, which would provide further upside for the stock, BIMB Securities said.

In a note on Monday, BIMB Securities said the pharmaceutical group could declare a FY2026 dividend per share (DPS) of 0.75 sen, translating into a dividend yield of about 3%. Pharmaniaga exited Bursa Malaysia’s PN17 status in March.

The research house said the return of dividends could emerge as a key re-rating catalyst for the stock. It added that deferred tax asset (DTA) recognition could further lift the company’s earnings and valuation.

BIMB Securities also did not rule out the possibility of a special dividend once the company’s cash flows stabilise, although ongoing capital expenditure commitments and balance sheet normalisation efforts may limit near-term payouts.

The house maintained its “buy” call on Pharmaniaga with an unchanged target price of 37 sen, the highest among the three analysts covering the stock, according to Bloomberg. The target price implies a potential upside of more than 54% from the stock’s current price of 24 sen.

On Pharmaniaga’s results for the first quarter ended March 31, 2026 (1QFY2026), due to be released on May 18, BIMB Securities expects earnings to come in slightly above, or at least within, expectations, with revenue forecast to grow about 10% to 11% year-on-year, supported by resilient government procurement orders and gradual expansion in the private market.

Pre-tax profit (PBT) is estimated at around RM33 million while profit after tax and minority interests could reach RM35 million to RM36 million, partly supported by DTA recognition.

The research house noted that the first quarter is typically among Pharmaniaga’s stronger quarters due to procurement timing, while improving visibility in its manufacturing segment could support a gradual unlocking of DTA over the next two years.

Operationally, the quarter is still viewed as a transition period, as the group’s new growth drivers, including insulin commercialisation and vaccine-related businesses, have yet to contribute meaningfully at full scale.

Nevertheless, BIMB Securities said cost pressures remain manageable for now, supported by existing raw material inventories. The impact from higher diesel prices is also expected to remain relatively contained, given the concession segment’s fixed delivery structure and subsidised diesel arrangements.

However, the research house cautioned that a prolonged Iran conflict could raise costs further, estimating a potential impact of about 3% on the cost of goods sold, with the fuller effects likely to emerge from 2QFY2026 onwards.

It also flagged risks in the Approved Product Purchase List (APPL) procurement cycle, where tender awards could be delayed following ongoing negotiations and average supplier price hikes of about 20%.