Fidson Healthcare consistent earnings’ growth lures investors to stock

Fidson Healthcare Plc’s consistent earnings growth combined with an aggressive expansion plan, has remained appealing to investors as they continue to find the stock of the drug marker attractive.   

The shares have gained 199.20 percent since the start of the year, outperforming the Nigerian Stock Exchange (NSE) All Share Index (ASI) of 44.84 percent.

It is one of the best performing stocks on the exchange.

Analysts are of the view that the increase in the drug makers’ stock price was as a result of its new World Health Organisation (WHO) compliant ultra-modern manufacturing facility which it completed in the mid half of the year in Sango Ota Ogun state.

For the first nine months through September 2017, Fidson Healthcare’s net income surged by 790.05 percent to N730.05 million as against N82.07 million as at September 2016.

Sales spiked by 127.87 percent to N10.30 billion in September 2017 as against N4.52 billion as at September 2016.

Experts added that the recent decision of government to ban the importation of some drugs will result in increased capacity for local manufacturers that could result in increased revenue for local manufacturers of drugs.

Drug makers in Africa’s largest economy and most populous nation grappled with paucity of foreign exchange scarcity that was disruptive to the industry.

However, the introduction of the Investors’ and Exporters’ window by the central bank in early in the year resulted in increased dollars hence easing the pains of manufactures.

Fidson Healthcare is efficient as net margin increased to 70.90 percent in the period under review as against 18.12 percent as at September 2016.

However, weak currency ballooned the drug makers’ cost of production as it imports 80 percent of its raw material except water.

An industry expert told BusinessDay that it takes more than 15 raw materials to manufacture a drug.

Fidson HealthCare’s cost of sales surged by 136.14 percent to N5.07 billion in the period while gross margins dipped to 50.6 percent in September 2017 as against 52.62 percent in September 2016.

While the major pharmaceutical firms quoted on the floor of the bourse have seen share appreciation on the back of earnings growth and aggressive expansion plan, the industry is plagued with challenges that are hindering its growth.

The influx of cheap imports that continue to compete against locally produced medicines and significant energy costs.

Meanwhile, ECOWAS Common External Tariff (CET), introduced in 2015 has continued to remain a contentious issue that threatens the existence of local manufacturers.

According to Fidson Healthcare the regulatory interaction and advocacy that is on-going to introduce tax adjustment tariffs would favour local manufacturers and moderate the long term impact of a free regional trade zone within West Africa.

BALA AUGIE and  DAVID IBEREME