PT Darya-Varia Laboratoria Tbk (DVLA) stock price has approached its lowest level in the last six years. The stock price of DVLA has corrected by more than 50% from its highest point during the COVID-19 pandemic surge.
The decline in DVLA's stock price is in line with the company's dwindling net profit. DVLA recorded an annualized net profit using the trailing twelve months method of only IDR 84 billion, a decrease of 43.6% compared to 2022.
The collapse of DVLA's bottom line performance was caused by the pressure on the company's sales. This indicates the sluggish performance of the company, as revenue calculation can be observed from the selling price of goods and sales volume.
Looking deeper, the decline in sales can be seen in the over-the-counter (OTC) drug sales segment and exports & toll manufacturing services, which decreased. Meanwhile, prescription drug sales were still able to show growth.
The decline in DVLA's performance is quite worrisome for its shareholders, as one of the investors' hopes comes from the dividends distributed. With the decreasing net profit, it will undoubtedly lead to a reduction in dividend distribution, considering that the payout ratio reaches 100% of net profit.
As a result, the price decline has been visible in recent years. At the same time, this price decline creates an opportunity with an increasingly higher dividend yield.
As for information, the OTC drug segment is the largest contributor to the company's revenue. These products include brands such as Natur-E, Decolgen, Decolsin, Neozep, Stop COLD, Enervon-C, and others.
One factor that has halted the growth of DVLA's performance is due to the company's focus solely on generating revenue from drug sales. Meanwhile, one business that can provide growth is the health consumption product line. Often, companies that successfully develop this business line can deliver long-term performance growth, as experienced by PT Kalbe Farma Tbk (KLBF) and PT Industri Jamu Dan Farmasi Sido Muncul Tbk (SIDO).
DVLA shares can be categorized as a slow-growth type or slow growers. The characteristics of slow grower stocks have a mature business, have been established for a long time, and have limited performance growth.
This is evident from DVLA's establishment in 1976 and its initial public offering (IPO) on the stock exchange since 1994. DVLA's slow performance is reflected in its decelerating revenue growth, and there is even the potential for a decline in performance in 2023.
On the other hand, DVLA's net profit has been quite fluctuating over the last 13 years, ranging between IDR 80-221 billion. However, DVLA has been diligent in distributing dividends, with a payout ratio reaching around 100%.
Based on these factors, the current decline in DVLA's performance poses a high risk of further stock price decline. On the other hand, the current stock price decline creates the potential for a higher dividend yield.