IMP Update – NEUTRAL

Despite 10.1% YoY growth in EAT, the company reported an 8% YoY slide in net revenue in 1Q2026, attributed to plant maintenance, late delivery of some raw materials and increasing competition in the EU-GMP drug segment. We revise 2026 net revenue and EAT projections down by 15% considering 1Q moderate results and potentially narrower margins in 4Q2026 in view of higher input costs. Downgrade rating from BUY to NEUTRAL and target price to VND44,500/share by YE2026, 26% lower than the prior update.

Net revenue fell by 8% YoY while EAT climbed by 10.1% YoY, to VND546bn and VND82bn, respectively, in 1Q2026, lower than our expectations.

Both hospital and pharmacy channels recorded a YoY drop in gross revenue (details about net revenue were not disclosed). The hospital channel, accounting for 49% of gross revenue, fell by 11% YoY, explained by maintenance of the IMP3 injectable penicillin line in 2M2026, late delivery of some raw materials and increasing competition from new EU-GMP beta-lactam factories. Meanwhile, the pharmacy channel, accounting for 48% of gross revenue, contracted by 7% YoY.

The EAT growth was underpinned by a heightened gross margin and a lower SG&A-to-net revenue ratio, as a result of costs control (e.g. tightening control on expenses for external services and market development for the hospital channel amid slower revenue growth, optimizing personnel expenses, etc.). Despite raw material prices trending up, mostly petroleum-related materials, the company projects the impacts may materialize from 4Q2026 to 2027, as materials until 3Q2026 were fixed prices.

In early May 2026, Livzon Pharmaceutical Group Inc., through LIAN SGP Holding Pte.Ltd, completed the acquisition of 67.87% stake in IMP via public tender offer.

We project net revenue and EAT for IMP at VND2,452bn (+0.5% YoY) and VND368bn (+5.5% YoY) in 2026, 15% lower than our prior update. While 2Q should see production restoring as plant maintenance and material delays conclude, we project that potential margin compression in 4Q2026 and competition pressure may still hamper the company from generating stunning performance for the whole year. However, with continued targets to accelerate R&D, launch more new SKUs focusing on complex generics and new first generics, and prioritize high-margin and high-tech products to stay competitive, we expect the company may almost sustain growth stream in 2026 and the following years.