IMP Flash Note – Note Rated

IMEXPHARM PHARMACEUTICAL JSC (IMP VN)

The hospital channel’s contribution continued to broaden at the expense of the pharmacy channel’s. A new factory is in the early phase of establishment. 

IMP reported net revenue of VND491bn (+2.5% YoY) and EBT of VND78bn (-21.5% YoY) in 1Q2024, completing 21% and 18% of the company’s full-year targets, respectively. Sales of finished goods captured almost 100% of the overall net sales. 

The hospital channel (+58% YoY) outpaced the pharmacy channel to become IMP’s largest earner, in line with the company’s target to expand the hospital channel’s contribution over the past years. The former accounted for 50% of the company’s revenue in 1Q2024 (1Q2023: 37.5%; 2023: 42%; 2022: 34%) despite making a gap of just 2% from the latter (-9% YoY). A strong rebound in the hospital channel post Covid-19 could explain the result. Although IMP’s sales to pharmacy chains jumped by more than 200% YoY in 1Q2024, the pharmacy channel’s performance was still driven by drops of wholesales and mom-and-pop stores, which aggregately captured 91% of the channel’s sales in 1Q2024. Furthermore, given the stagnant pharmacy market, IMP intentionally slowed down production in IMP1 factory to reduce inventories. 

The EBT slumped in 1Q2024 as a result of a squeeze in gross margin despite an improved SG&A expenses to net revenue ratio. The gross margin slid to 36.8% in 1Q2024 (1Q2023: 48.2%), primarily attributed to higher depreciation owing to IMP4 coming online from 3Q2023 and slower production of other factories. Meanwhile, the SG&A expenses to net revenue ratio shrank to 20.0% in 1Q2024 (1Q2023: 27.2%) thanks to heightening cost efficiency. 

The company is working to set up a new factory – IMP5, focusing on more complicated drugs (e.g cardiovascular, diabetes, etc.) beyond antibiotics, expected to go into operation in 2027. IMP1 factory captured the largest revenue contribution in 1Q2024 (42%), followed by IMP3 (35%), IMP2 (14%), IMP4 (5%) and others (4%). The mainstream products of these factories are antibiotics with various types of formulations. IMP4, which was qualified for EU-GMP in 2022 and started operation in 3Q2023, is expected to accelerate its operating capacity toward the end of this year. IMP currently owns 11 EU-GMP certified production lines, highest among Vietnamese pharmaceutical companies. The lines favour the company in bidding to hospitals. 

Quick comment: IMP has maintained its position as one of Vietnamese prestigious pharmaceutical manufacturers. We believe that the company may continue to attract investors’ attention thanks to investments in advanced production standards, R&D, strengths in the hospital channel and good financial health. However, similar to other listed pharmaceutical stocks, IMP has low trading liquidity.