Equity Analysis /
Vietnam

Imexpharm Pharmaceutical : 2019 bidding results and 2020 outlook

  • Bids won in the hospital channel in 2019 reached VND800bn

  • IMP’s growth story in the coming years will be the hospital channel and the EU-GMP plants

  • We revise our recommendation to Accumulate and cut TP slightly to VND67,000/share

Son Tran
Son Tran

Market Strat, Retail, Consumer 

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Rong Viet
4 March 2020
Published byRong Viet

IMP’s growth story in the coming years will be the hospital channel (ETC) and the EU-GMP plants. When the three EU-GMP plants run at designed capacities (in 2023, according to our forecast), we forecast that they will contribute cVND2,000bn in revenue, while the two old WHO-GMP plants will contribute VND800bn (unchanged).

IMP’s stock has increased 10% since our Buy recommendation in December 2019. For now, we revise our recommendation to Accumulate with an expected return of 18%. Our new target price in 2020 is VND67,000/share (previously VND64,500/share).

The prospect for Vietnam’s pharmaceutical industry is positive in the long term thanks to increasing spending on healthcare. However, it is not spread equally for all companies. As the general trend of the industry shifts from foreign medicine to domestic and the state’s promotion of social insurance, only companies with high production standards and strengths in the ETC will benefit the most. In this regard, Imexpharm (IMP) is our preferred stock.

2019 bids for hospital and pharmacy channel

The value of ETC bids won for IMP in 2019 reached VND800bn – this figure is double the bids won in 2017-2018 (VND400bn), of which nearly 90% was in Tier 2. Although the value does not totally reflect actual revenue, which also depends on actual demand from hospitals, it still implies that revenue growth from the ETC channel of the company in the next two years is very promising.

For the pharmacy channel (OTC), 2020 will continue to be difficult as the pharmacy retail market is somewhat saturated and the implementation of Circular 02 (Ministry of Health) will continue to have a negative impact on pharmacies’ sales. We forecast that IMP’s OTC channel will not grow in 2020 and its contribution to total revenue will drop to below 50%.

Regarding production plants, we forecast that the capacity of EU-GMP plants (IMP2, IMP3) will increase sharply in 2020 and contribute to the revenue growth of the ETC channel. The new IMP4 factory is scheduled to receive EU-GMP plants in Q2 and go into production in Q3. It is expected to start contributing revenue from Q4 20 with an estimated value of less than VND100bn. Meanwhile, two old factories in Dong Thap will reduce their contribution to its revenue due to the restructuring of product portfolio to eliminate inefficient products (low profit margin).