AFT Pharmaceuticals - Growth underpinned by international momentum

AFT Pharmaceuticals’ FY24 results demonstrated record earnings and sales, with 24.8% year-on-year sales growth. Revenues of NZ$195.4m were driven by strong domestic market performance (+13.6%) and solid traction from international (Asia and RoW) markets (+ 108% y-o-y, supported by a NZ$6m milestone payment from US partner Hikma). Investments in future growth (R&D and marketing) and sales-mix effects slightly affected margins adversely (operating margin of 12.4% in FY24 vs our expectation of 12.8%) but we anticipate the upfront investments will provide a revenue uptick from FY26. AFT’s balance sheet remains strong, allowing for a dividend announcement for FY24 (1.6c/share; c 10% payout ratio) and a reduction in debt, both positive signs for investors. We tweak our estimates for the results and FY25 guidance (operating profit of NZ$22–25m, excluding any licence payments), resulting in our valuation adjusting to NZ$725.5m or NZ$6.92/share (from NZ$698m or NZ$6.65/share).