IMP - IR Newsletter Q4. 2021

I. VIETNAM ECONOMY IN 2021 AND FORECAST FOR 2022

Vietnam economy in quarter IV has signaled to recover positively after being hugely impacted by the pandemic in quarter III. In detail, the Gross Domestic Product of Vietnam in quarter IV 2021 went up by 5.22%, which is higher than the growth of 4.61% in quarter IV 2020.
GDP of full-year 2021 grew by 2.58% year over year. Delta variant has extremely affected the Vietnam economy; this growth is 4% lower than the forecasted number at the beginning of the year. Despite low GDP growth, Vietnam is successful in controlling the pandemic and the economy gradually resumes. From the country with a low vaccination rate, until the end of 2021, Vietnam has about 80% of the population to be vaccinated (approximately 100% people being older than 18-year-old) and became one of the 3 countries having the fastest vaccination speed per day and week all over the world.
In GDP structure, the service sector accounted for 40.95%, the next position is construction and industry making up 37.86%; agriculture, forestry, and fishery constituted 12.36%, tax and substitutes hold 8.83%. Agriculture, forestry, and fishery continued to be a spotlight of Vietnam economy with a growth rate of 2.9% and contributed to being a foundation for the economy. Export agricultural, forestry, and fishery products in 2021 attained VND 48.6 billion, increasing by 14.9% compared to the year 2020.
Besides, foreign direct investment rose by 9.2% in comparison with the figure of 2002. The consumer pricing index rose by 1.84% compared to the previous year, the lowest growth rate during the last five years.
Import and export turnover in 2021 of Vietnam recorded the number of USD 668.6 billion, going up 22.6% year over year. Export turnover reached USD 336.25 billion, which increased by 19% compared to the year 2020, and import turnover attained USD 332.25 billion, rising by 26.5% year over year. In 2021, Vietnam witnessed an export surplus of USD 4 billion, mostly coming from the surplus of USD 1.5 billion in Dec 2021.
The Covid-19 pandemic has boosted digital transfer in Vietnam. According to the assessment of the Ministry of Planning and Investment, in 2021 the size of Vietnam digital economy increased by 31% and attained USD 21 billion. If evaluating within the South East Asian, the size of Vietnam digital economy was ranked after Indonesia and Thailand but equal to Malaysia. As forecasted to 2025, Vietnam digital economy would achieve USD 57 billion and hold the second position after Indonesia.
On 12 November 2021, the Resolution referring to the socio-economy development plan in 2022 has been passed by the National Assembly, then the objective of GDP growth in 2022 is about 6% to 6.5%. According to a report of the Asian Development Bank – ADB disclosed in December 2021, the forecast of Vietnam economic growth might be 6.5% in 2022. Jacques Morisset – Lead Economist of World Bank for Vietnam stated that Vietnam was able to reach the goals if meeting two conditions: controlling the pandemic and improving the balance of supply and demand. The Vietnamese government should have solutions to stipulate demands, Morriset said.

II. VIETNAM PHARMACEUTICAL INDUSTRY IN QUARTER IV 2021 AND FORECAST

The Vietnam pharmaceutical industry in 2021 had to encounter many challenges and obstacles. Under the 4th wave of the pandemic and many social distancing orders, quite of few pharmaceutical enterprises could not operate with full capacity, however, there were some companies being able to increase capacity. According to a survey done by Vietnam Report with pharmaceutical firms about the interactions of Covid-19 in 2021, 57.14% of enterprises evaluated that the situation became slightly worse while 14.29% said that there was no impact, and only 7.14% of companies considered that the circumstance was moderately better.
In addition to the impacts induced by the Covid-19 pandemic, pharmaceutical enterprises are also faced with the supply chain disruption causing the increase in raw material prices. Besides, the cost of maintaining 3 or 4 on-the-spot productions at the peak of the pandemic led to an increase in product cost and affected the gross margin of firms.
Although there are some difficulties, according to a survey carried out by Vietnam report, up to 62.5% of experts and enterprises participating in the survey said that the pharmaceutical industry might experience a higher growth rate in 2022 whereas there are 12.5% of firms believed strong growth and much better and only 6.25% of companies assessed that the situation would become worse than 2021.
In 2022, prices of raw materials are predicted to increase due to the Covid-19 pandemic. Hence, pharmaceutical enterprises have to draw appropriate inventory strategies to tackle the problem of price fluctuation and maintain gross margin.
The pharmaceutical industry is always a pioneer to ensure drugs supply for the whole population, especially in the period of the pandemic, the role of the industry has been more vital. In 2021, Vietnam has conducted clinical trials of Covid-19 treatment medicine – Molnupiravir and brought positive results to the patients. It is predicted that Vietnam would produce such a type of drug to self-supply and enhance medical care activities in 2022.

III. IMP STOCK IN QUARTER IV 2021

The total transaction volume of IMP in quarter IV of 2021 attained 1,879,686 shares. In which, there were 750,600 shares transacted under order matching and 1,129,086 shares dealt via put through the method. The total amount of transactions in quarter 4 was only 28.4% of the number of corresponding periods last year whilst total transaction value was 41.9%, which showed that IMP price has increased in 2021. The average order matching amount in quarter 4/2021 was: 11,373 shares. If calculating for only transaction volume of order matching deals, the total number of order matching shares in quarter 4 2021 was 11.5% of the figure of quarter 4 of 2020, while the amount of put through transactions increased more than 11.6 times year over year.
In comparison to quarter 3 of 2021, the transaction volume of quarter 4 of 2021 went up 23.3% thanks to putting through deals rising doubly while order matching transactions reduced by 22.5%.
The change of shareholder structure by welcoming 2 new shareholders possessing more than 5% of total outstanding shares in quarter 2 of 2021 and the influences of the pandemic have resulted in fewer transactions of IMP shares in the stock exchange.

IV. IMEXPHARM OPERATIONS IN 2021 AND GENERAL OBJECTIVES FOR 2022

1. Business results in 2021

As of the end of quarter IV 2021, total net revenue and other incomes of Imexpharm was VND 1,290.6 billion, meeting 84.4% of the annual plan and dropping by 6.6% year over year whereas profit before tax attained VND 238.9 billion and was 82.4% of the figure set by the General Meeting of Shareholder and declined 6.5% compared to the previous year. The social distancing orders travel restrictions, delayed hospital visits have caused ETC revenue to plummet. In detail, ETC sales fell by 12.7% and simultaneously OTC decreased by 0.9% in comparison with the previous year.
Imexpharm products have been playing a significant role in revenue structure at the level of 94%, but to revenue of such products reduced by 7.4% compared to the earlier year. While revenue of franchising products also declined by 11.1% year over year.
The cost of goods sold of the Company decreased by 5.3%, which is lower than the drop of 5.6% of net revenue. However, selling expenses were cut dramatically by 14.9%, and administrative expenses slightly increased by 1.8%. The gross margin in 2021 was 38.5%, which went down by 1.4% compared to the number of 39.9% in 2020. The 3-4 on-the-spot production activities together with protective measures during the outbreaks of the pandemic in quarter 3 of 2021 have pushed production cost increase sharply; as the resulting decrease in the cost of goods sold was not corresponding to the fall of net revenue.
Liquidation ratios of Imexpharm increased slightly year over year, reflecting appropriately the conservative working capital policy and minimization of liquidation risks of the Company.
Due to the drop in net profit, the profitability ratios such as ROE, ROA all reduced in comparison with last year. Similarly, EPS also declined by 6.2%.
The closing price of IMP on 31 Dec was VND 77,800, surging by 38.1% in 2021, which lead to the increase in P/E and P/B year over year. P/E soared by 9.6 times and P/E went up 0.8 times.
Under complicated movement of the pandemic, global supply chain disruption, increase in material prices while delivery time was extended, Imexpharm is pro-active to stockpile materials to maintain gross margin; therefore, inventories of the Company soared at end of 2021. Additionally, controlling account receivables has been well done by the Company in quarter 4 when the business and production activities are recovering. Account receivables declined dramatically compared to the figure at beginning of the year.

2. Remarkable activities of Imexpharm in 2021

Although revenue and profit of Imexpharm have not met the expectations and the schedule to accredit IMP4 was delayed because of impacts of the pandemic, Imexpharm has accomplished the following points in 2021:
– Ensure health safety for more than 1,200 employees and maintain business and production continuity.
– Imexpharm drugs serving for Covid-19 treatment have been distributed widely to pharmacies and hospitals.
– Financial activities and risk management have been performed well, working capital was monitored closely to ensure the performance of business and production.
– Inventory strategies have been implemented appropriately to mitigate risks of an increase in the price of raw material which affected gross margin.
– Policies and compensation for employees are kept stable.
– Sales, Marketing, customer care activities have been adopted flexibly to the new situation.

3. General objectives of Imexpharm in 2022

– The top priority in 2022 is to conduct an inspection to accredit EU-GMP for the IMP4 factory.
– Pushing digital activities in business and production.
– Restructuring the organization, saving costs, improve business efficiency.
– Enhance capabilities of sales branches.
– Maintain and reinforce quality control system continuously.