I. VIETNAM ECONOMY IN FIRST HALF OF 2020 AND FORECAST
In 2020, the world economy has been severely impacted by the Covid-19 pandemic. Vietnam’s economy was predicted to witness a negative growth in the second quarter. However, according to the report from the General Statistics Office, the Vietnam economy grew by 0.36% in the 2nd quarter, which is the lowest rate during the last 10 years. GDP of 2020 the first six months increased by 1.81%. In the circumstance of fighting against the pandemic together with maintaining economic growth, the efforts of Vietnam are laudable. The impetus of Vietnam economic development is originated from processing and fabricating industry rising by 4.96%, market retails and wholesales going up 4.3% in accompany banking and insurance services having a 6.78% increase. In terms of economic structure, industry and construction sectors made up 33.44%; services accounted for 42.04%, and product taxes deducted by-product substitutes constituted 10.36%.
At current, Vietnam is facing many internal and external obstacles. The Agriculture and Forestry sector in the first months of 2020 was adversely affected by droughts and soil salinity in South West provinces and African swine fever damaging the animal husbandry. Whereas social distancing and locking down of the large economies such as the USA, Europe, and China cause the plummet of aggregate demand, the world economy has fallen into a recession. Vietnam’s key export markets are negatively influenced, especially in garment, leather shoes; this impact caused a 2% decrease in exports of Vietnam in June. Moreover, the trade war between the US and China has been escalating, which brings more uncertainties to the world economy.
According to the evaluation of Bloomberg, Vietnam is one of the spotlights in economic growth although the economy relies on exports. Vietnam prime Minister-Nguyen Xuan Phuc forecasted in May that the Vietnam economy would increase 4%-5% thanks to the implementations to attract foreign investments. While Asian Development Bank predicted Vietnam growth at 4,8% in 2020 and estimated inflation at 3.3%.
Although there are many positive outcomes in protection and prevention against the pandemic of Vietnam, the economy in 2020 has to encounter a lot of challenges such as strong dependency on the world economy via export activities. Hence, the Vietnam economy only recovers if the world economy becomes better. Opening the economy has to be done in a cautious manner due to the fact that the pandemic still has complicated movements. At present, the priority of Vietnam is to boost domestic productions and consumption and to maintain local businesses rather than enhancing economic growth with the risk of pandemic outbreaks.
II. VIETNAM PHARMACEUTICAL INDUSTRY IN 2020 AND FORECAST
The pandemic outbreak at the beginning of 2020 has generated sharp increases in revenue of pharmaceutical companies at the end of quarter 1 due to a medical stockpile demand of residences. OTC channel witnessed a surge in the time before applying social distancing in Vietnam.
The pain relief, antipyretic drugs, antiseptics, and handwashing gel, strengthen immune system drugs sales soared in March of 2020. However, the pharmaceutical industry has apparent difficulties due to the economic crisis and plummet in aggregate demand.
Furthermore, most pharmaceutical raw materials are imported from overseas, while the two substantial partners are China and India. Spreads of the pandemic in China, India, and Europe have led to obstacles and adversely impacted on material imports of enterprises. On the other hand, implementing social distancing in April caused the number of patients visiting hospitals to decline dramatically; as the consequence, ETC channel revenue has been negatively affecting. An increase in the unemployment rate and a decrease in income will highly influence medicine expenditures though these products are essential. The pharmaceutical industry is impacted by the Covid-19 pandemic but there is a lag in comparison with other sectors. Revenue dropping will indirectly affect investments of domestic pharmaceutical firms to upgrade their production standards. Currently, most enterprises are focusing on risk management, keep business activities stable, and wait for the market recovery.
In the third quarter, while the pandemic is still going on complicatedly in American nations and India, there is not an optimistic thought about the pharmaceutical industry. Nevertheless, as an essential good and being necessary for everybody, the pharmaceutical sector will quickly recover together with the general recovery of the economy.
III. IMEXPHARM STOCK
The total volume of IMP transacted in the first half of 2020 reached 9,653,980 shares (this number excluded transactions via State Securities Commission). The amount is higher than the total number of traded shares in 2019. In detail, the volume of the first 6 months is equal to 148% of 2019 transacted shares. The positive business outcomes in 2019 together with expectations for the strategic shareholder made Imexpharm stock more attractive in investors’ eyes. However, due to the effects of the pandemic, Imexpharm stock price had many fluctuations. The variance between highest (62,000 dong/share) and lowest (42,100 dong/share) closing price was 20,000 dong.
In May, Imexpharm witnessed ownership transferred from Dragon Capital group of shareholders and others to SK Investment Vina III. At present, SK Investment Vina III constituted 24.94% of total Imexpharm listed shares, which constitutes the highest ownership percentage among Imexpharm shareholders.
IV. IMEXPHARM OPERATION IN FIRST HALF 2020 AND OBJECTIVES FOR SECOND HALF
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Business operation in the first half of 2020
| No. |
Criteria |
1st half 2020 |
% plan 2020 |
1st half 2019 |
Growth rate |
| I |
Operational results (billion dong) |
|
|
|
|
| 1 |
Total net revenue and incomes |
597,3 |
34,1% |
564,1 |
5,9% |
| 2 |
Net revenue |
592,4 |
|
558,8 |
6% |
| 3 |
Operational profit |
108 |
|
85,5 |
26,3% |
| 4 |
Profit before tax |
110.7 |
42.6% |
86,3 |
28.3% |
| 5 |
Profit after tax |
88.4 |
|
68.9 |
28.3% |
| II |
Assets-Liabilities |
|
|
|
|
| 1 |
Total assets |
1,940.3 |
|
1,845.5 |
5.1% |
| 2 |
Owner equity |
1,586.6 |
|
1,470.6 |
7.9% |
| 3 |
Charter capital |
494.2 |
|
494.2 |
0% |
| III |
Liquidity ratios (times) |
|
|
|
|
| 1 |
Current ratio |
2,6 |
|
2,3 |
0,3 time |
| 2 |
Quick ratio |
1,4 |
|
1,2 |
0,2 time |
| IV |
Profitability ratios |
|
|
|
|
| 1 |
Profit before tax/net revenue |
18.7% |
|
15.4% |
3.3% |
| 2 |
ROS |
14.9% |
|
12.3% |
2.6% |
| 3 |
ROE (last 4 quarters) |
11.9% |
|
9.9% |
2% |
| 4 |
ROA (last 4 quarters) |
9.6% |
|
8.2% |
1.4% |
| 5 |
EPS (adjusted) |
3,681 |
|
2,907 |
26.6% |
| 6 |
BV (dong) |
32,125 |
|
29,768 |
7.9% |
| 7 |
P/E (time) |
15.3 |
|
16.3 |
(1) time |
| 8 |
P/B (time) |
1.8 |
|
1.6 |
0.2 time |
|
Market price 30/06 (dong) |
56,500 |
|
47,300 |
19.5% |
Total net revenue and income of Imexpharm in the first 6 months of 2020 were 597,3 billion dongs, which increased by 5.9% year over year. Net revenue also rose by 6%. Due to the effects of the pandemic, the revenue growth rate did not meet the expectations and only made up 34.1% target. Imexpharm ETC witnessed a positive development, grew at 80%, and account for 37.7% in revenue structure. Whereas the OTC channel had a negative growth of 9% in the first half of 2020 due to adverse impacts of a decrease in aggregate demand.
In comparison with revenue, profit before tax was going more positively. Accumulating to June 30th, total profit before tax of Imexpharm was 110.7 billion dongs, which increased 28.3% compared to the corresponding period of 2019 and constituted a 42.6% annual plan. A high growth rate of profit is generated by maintaining the ratio of revenue divided by the cost of goods sold at 60.4% to 61%. The speed of the cost of goods sold increasing was approximately 5% while one of the revenue was 6%.
In addition, selling expenses are cut considerably. In detail, selling expenses dropped deeply by 10.5 billion dong compared to earlier years because some sales support activities could not be performed due to the pandemic. Besides, strictly controlling expenditures is implemented to meet profit targets. Administrative expenses had a slight rise of 500 million dongs in comparison with last year. Revenue from financial activities declined by 2.2 billion dongs whereas other incomes went up about 1.9 billion dongs. Thus, the high-profit growth rate is mostly originated by the core business operations of the Company.
Total assets increased inconsiderably compared to the corresponding period of last year which is generated from recording construction costs, the machine of Functional foods factory, and rising in inventories.
Additionally, owner equity increased by 7,9% thanks to the accumulated profits of this period and last year’s profit distributed to the investment and development fund.
Liquidity ratios did not have many changes compared to the previous year, 2019, and are kept at a safe level. The current ratio and quick ratio were 2.6 and 1.4 respectively. Due to the positive growth of profit, profitability ratios are improved in comparison with the ones of 2019. To put in more detail, ROS reached 14.9%, which had a 2.6% increase compared to the earlier year. ROA, ROE (last 4 quarters) were 9.6% and 11.9% respectively; both these ratios are higher than the rates of 2019. Earnings per share in the last four quarters reached 3,681 dongs, which went up 774 dong corresponding to 26.6% increased year over year.
Book value was 31,125 dong/share, which rose 7.9% compared to the previous year. The closing price of the stock at the final round of Jun was 56,500 dong/share. P/E dropped 1 time while PV had a slight increase of 0.2 times compared to the previous year.
2. Imexpharm strategies in the second half of 2020
Due to the complicated movements of the pandemic, Imexpharm identifies the top priority in this time is to tightly control expenditures, account receivables to maintain profit growth and working capital for business and production activities.
The Company will continuously boost performance in the ETC channel in order to increase its proportion in the revenue structure while maintaining marketing and selling activities at the OTC channel to catch the market recovery after the pandemic will be gone.
Imexpharm also strictly controls inventory to prevent high levels of inventories adversely affecting working capital but inventory has to meet the demand of productions, especially in the situation that the pandemic is spreading in India, the second wave outbreak in Europe and natural disasters in China.
The Company strictly monitors the schedule to accrediting EU-GMP for IMP4 and performs necessary stages for remote inspections. IMP4 factory is behind schedule to obtain EU-GMP certificate since the pandemic has been preventing European experts to come and do on-site inspections as planned.
On May 30th, 2020, Imexpharm successfully organized the Annual Meeting of Shareholders in 2020. In this meeting, the AGM appointed Mr. Truong Minh Hung as a new member of the BODs to replace the resigned member-Mr. Huynh Van Nhung. Moreover, the AGM approved dividend payments of 2019 and award shares for shareholders. On July 15, 2020 Imexpharm has finalized the record list to pay a 10% cash dividend and 10% stock dividend as well as 20% award shares for existing shareholders. Dividends and rewards shared will be paid on July 30th, 2020.