Renata's stock drops despite strong profit growth

The stock price of Renata PLC dropped 2.31 per cent on Sunday even as the drug maker reported an impressive profit growth and declared a hefty dividend for the financial year that ended in June last.

The drug maker posted a net profit of Tk 3.62 billion in FY24, registering a 55 per cent increase from the previous year, primarily driven by higher exports and lower finance expenses.

Based on the profit growth, the company declared a 92 per cent cash dividend, meaning the shareholders will get Tk 9.2 per share.

Despite the earnings news, the drug maker's stock lost more than Tk 17 each to close at Tk 723.2 on the Dhaka Stock Exchange on Sunday, although the overall market closed higher.

The impact of the dividend declarations and higher income did not reflect in the stock price, as investors may have expected more dividends, said a leading stockbroker who declined to be named. "A lower-than-expected dividend may have disappointed investors," he noted.

He explained that the company will disburse nearly Tk 1.06 billion in cash dividends from its profit of Tk 3.62 billion, which means it will be allocating one-third of its profit for dividends.

Renata's revenue also grew 14 per cent year-on-year to Tk 37.71 billion in FY24, riding on higher sales and increased exports.

"Cost efficiency and optimization measures helped increase the revenue, but selling, marketing, distribution and administration costs were up by around 8 per cent," said the company.

Its export growth was 4 per cent, and export destinations have been increased to 50, including the US and Australia.

The drug manufacturer started exporting medicines to the US market directly in April this year from its US-FDA approved facility in Rajendrapur, becoming the sixth drug manufacturer from Bangladesh to directly ship products to the world's largest market.

Renata also shipped Levonorgestrel 1.5mg in May this year to Australia, which is the first registered product of the leading Bangladeshi pharma company in Australia.

In June of this year, Renata exported its first shipment of Terbinafine tablets to the UK market. With this new addition, the company's export portfolio to the UK has expanded to 17 products.

Early this month, Renata also began exporting drugs for Parkinson's disease to Europe.

Meanwhile, the government has re-established the procurement of birth control pills, which was previously de-prioritised due to the Covid-19 public vaccination programme.

The company said procurement of a new product for the treatment of tuberculosis has boosted its overall year-on-year contract manufacturing revenue 110 per cent growth.

"We achieved the highest growth among the top five pharmaceutical companies in Bangladesh in the pharma segment, recording a 12 per cent growth compared to the industry's growth of 7 per cent," said the company.

In the animal health segment, Renata claimed that it continued to be the market leader with a growth of 9 per cent while the market growth was 6 per cent.

Alongside, the drug maker's financial risk mitigation initiatives have reduced net finance costs by 13 per cent.

In June this year, the company secured a $60 million loan from the US-based International Finance Corporation (IFC) to bolster its working capital.

In January, the Bangladesh Securities and Exchange Commission (BSEC) allowed the company to issue a five-year bond worth Tk 6.60 billion. The regulator also allowed the company to issue preference shares worth Tk 3.5 billion in April this year.

The net operating cash flow per share, a measure of a company's ability to generate cash from its operations, stood at Tk 18.16, slightly down from Tk 18.18 the previous year.

The net asset value with revaluation, which refers to the excess of total assets over total liabilities, reached Tk 295.56 per share, up from Tk 266.87 in June last year.

The annual general meeting of the company will be held on December 5 and the record date for entitlement of dividend is on October 21.

Renata is one of the fastest growing drug makers in Bangladesh, which manufactures and markets medicines, nutritional products, and vaccines for humans along with veterinary medications.

It began its operations in 1972 as Pfizer (Bangladesh). In 1993, Pfizer transferred the ownership of its Bangladesh operations to local shareholders, and the name of the company was changed into Renata. It got listed in 1979.

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