The drugmaker’s outlook is underpinned by the ample excess capacity at the company’s existing plants and consumer healthcare expansion, the brokerage said in a research note today.

“The ample excess production capacity at Pharmaniaga’s existing plants will allow it to ramp up output in the next three to five years – in light of rising pharmaceutical demand and new product launches – with little to no incremental capital expenditure, thus potentially leading to better economies of scale and margins,” it said.

The brokerage noted that Pharmaniaga’s new 10-year logistics and distribution government concession agreement – to be inked by year-end – will include a more stringent maximum delivery timeframe of five working days for medicines, compared to the current seven days, with monetary penalties imposed for non-compliance.

“Nonetheless, the company does not foresee any major challenges complying with the new requirements as it currently delivers within four days, on average,” said CGS-CIMB.

As such, the research firm has reiterated its “add” call for Pharmaniaga, but with a lower target price of 73 sen from 79 sen previously.

At 11:35am, the company’s share price dipped half a sen to 59.5 sen with 134,200 shares traded.