AFT Pharmaceuticals - Near-term goals in sight with FY23 momentum

AFT Pharmaceuticals reported another strong fiscal year, capping off three consecutive years of double-digit top-line growth. FY23 revenues of NZ$156.6m grew 20.2% year-on-year. As expected, top-line growth was H2 weighted, with a c 38% sequential improvement in H223 over H123 attributed primarily to new launches in Australia (revenue up c 61% over H123 in the region). Margins, however, were affected by lower licensing income and higher product launch marketing spend (operating margin of 12.6% vs 15.6% in FY22). We expect management to achieve the stated revenue target of NZ$200m in FY25, supported by higher marketing spends that will put some pressure on margins in the near term (FY24 operating profit guidance of NZ$22–24m). Management also announced a maiden dividend of 1.1c/share (payable in July 2023), although the payout (c 11%) is lower than the initial target of 20–30%. Accordingly, our valuation adjusts to NZ$644m or NZ$6.14/share from NZ$6.34/share previously.