PETALING JAYA: Phillip Research is optimistic about the prospects of UMediC Group Bhd

which is pressing ahead with an expansion strategy that is set to reshape its earnings profile over the next two years.

The healthcare equipment maker is on track to double its manufacturing capacity to 12 million units annually by the first quarter of calendar year 2026, supported bysignificant plant expansion as well as new automation investments.

According to Phillip Research, UMediC’s production output has risen to six million to seven million/year from five million/year in mid-2024, as capacity is slated to double to 12 million/year by the first quarter of 2026 upon the completion of the group’s 20,000 sq ft plant.

The research house said a new blow-fill-seal (BFS) machine, equipped with clean-in-place and sterilise-in-place automation, could further boost the efficiency and production consistency for UMediC.

While near-term margins for the group may remain tight due to marketing and administrative costs, operating leverage is set to gradually materialise as BFS utilisation ramps up, anchoring the next leg of earnings expansion, according to Phillip Research.

UMediC’s distribution segment continued to provide the bulk of earnings, contributing 66% of revenue for the financial year ended July 2024 (FY24).

This was backed by partnerships with multinational principals, with UMediC distributing more than 40 stock keeping units to hospitals and clinics.

Phillip Research pointed out that the company was also “moving up the value chain by expanding into high-end patient monitors and smart hospital solutions, capturing demand from both government healthcare spending and the expansion of private hospitals.

UMediC’s niche subsidiaries, Arteria Medika and Patho Solutions, strengthened exposure to higher-value consumables with recurring replacement demand.

The research house noted that the businesses allowed UMediC to diversify into specialised areas with higher barriers to entry and superior margin potential.

On the international front, it is expanding its export footprint, with management particularly focused on India and China.

In India, annual hospital admissions exceeded 54 million, presenting a sizeable growth runway.

In China, the shift towards disposable respiratory consumables post-Covid gave UMediC’s premium humidifiers an edge over entrenched generic products.

Phillip Research is maintaining its “buy” call on UMediC, with a target price of 45 sen.