I. VIETNAM ECONOMY IN FIRST 9 MONTHS OF 2020 AND FORECAST FOR THE WHOLE YEAR
According to General Statistics Office, Vietnam economy in quarter 3 grew by 2.62% and the growth rate of first 9 months in 2020 was 2.12%; which was the lowest one in comparison with the corresponding period of the years from 2011 to 2019. However, there was a positive signal that Vietnam economy in quarter 3 was going better than in quarter 2, and many experts consider this time as the period of “increase in turbulence”.
Actually, Vietnam economy is a part of the world economy and relies heavily on exports as well as strongly influenced by global trade. In the context of the pandemic which is moving complicatedly especially in Europe and the United States with the second wave infection in Autumn and winter, Vietnam deserves praise for all efforts to fight against the epidemic and try to recover the economy concurrently. The fabricating and processing industry has been placing a vital role to boost the economy. In the first month of 2020, Vietnam industry and construction still rose by 3.08% and contributed 58.35% in total Gross Domestic Product (GDP). Whereas agriculture, forestry, and aquaculture went up by 1.84% and constituted 13.62% in GDP structure. Due to the adverse impacts of the pandemic, service is the sector that has the lowest growth rate among 3 ones at 1.37% and accounted for 28.03% in total GDP.
Covid-19 pandemic is still spreading globally, according to World Bank in June, World economy would decline by 5.2%, the most recessionary rate in decades. In this circumstance, Vietnam economy in 2020 is envisioned a 2% increase and 3% with all best efforts (According to the Ministry of Planning and Investment). The outbreak of the pandemic at the end of July made many specialists worry that the economy will become worse. Nevertheless, the appropriate social distancing solutions, circle sections to extinguish the pandemic have been effective and Vietnam economy catches momentums to recover. Vietnam had an export surplus of 17 billion USD in the first 9 months, which is a good sign; however, after conducting a technical analysis, there were some existing risks because the export surplus is due to a decrease in import, which proves that supply chain could be broken, Vietnamese enterprises encounter obstacles to import raw materials to produce finished goods. The current situation is still struggling, all hard workings to recover the economy must pertain to the top priority ensuring healthiness for residences, which is the dual responsibility that the Government and citizens determine to carry out during the rest months of 2020 and can be prolonged to 2021.
II. VIETNAM PHARMACEUTICAL INDUSTRY IN 9 MONTHS OF 2020 AND PREDICTION
Vietnam pharmaceutical industry in first 9 months of 2020 also face many problems which are opposite to many thoughts that pharmaceutical industry is highly profitable in the pandemic. Due to the fact that Covid-19 has not been treated by a specific drug yet, providing medicine for curing Covid-19 patients is not a business segment targeted by pharmaceutical enterprises.
On contrary, double impacts including: social distances, people have a trend to restrict to go to hospitals and sudden plummet in income have more or less reduced sales revenue of many pharmaceutical companies. Furthermore, other major issue is that most ingredients are imported from overseas, the disruptions of global supply chain make enterprises struggled in import raw materials. The circumstance of supply fluctuation and import restrictions in some countries such as India have caused increase in price. To keep stable profit margin, enterprises have to be proactive in stockpile raw materials to meet production demands. As a consequence, the need of working capital may be raised to settle for these storages.
The outbreak of the pandemic in quarter 3 have some negative effects on sales of pharmaceutical industry. However, controlling of the pandemic has contributed to mitigate adverse impacts on pharmaceutical industry. On the whole, the end months of 2020 are predicted to be a recovery period of pharmaceutical industry together with the national economy in difficult situations. Companies in this time have controlled expenditures tightly, followed up closely changes in price of materials to take appropriate counter measures as well as strengthen marketing activitives to catch up recovery after Covid-19 pandemic.
III. IMEXPHARM STOCK
Total transaction volume of IMP in quarter 3 of 2020 attained 8,034,862 shares in which 6,466,830 stocks were traded under order matching and 1,568,032 were dealt via put through method. IMP stocks have high liquidity in quarter 3 thanks to dividend declaration and stock award scheme. In general, all businesses are more or less impacted by the economic crisis; however, the pharmaceutical industry is considered to be pretty safe among uncertainties of current financial market. The appearance of strategic shareholder named SK Investment Vina III together with efficient business activities, target to invest in high quality products competing directly with imported drugs make IMP be able to attract more and more investors and improve liquidity.
IV. IMEXPHARM BUSINESS OPERATIONS IN Q3 AND OBJECTIVE IN Q4/2020
Operational results in the first 9 months of 2020
|No.||Criteria||YTD Sep 30th 2020||% plan 2020||YTD Sep 30th 2019||Growth rate|
|I||Business operational results (billion dongs)|
|1||Total net revenue and other income||893.4||51.1%||903.4||(1.1%)|
|4||Profit before tax||167.3||64.3%||137.4||21.8%|
|5||Profit after tax||139.3||110.5||26.1%|
|II||Asset-Liability (billion dongs)|
|III||Liquidation ratios (times)|
|1||Current ratio||2.3||2.6||(0.3) time|
|2||Quick ratio||1.3||1.3||0 time|
|1||Profit before tax/net revenue||19%||15.5%||3.5%|
|3||ROE (4 latest quarters)||12.2%||10%||2.2%|
|4||ROA (4 latest quarters)||9.9%||8.6%||1.3%|
|6||BV (dong) adjusted||25,415||23,460||8.3%|
|7||P/E (times) adjusted||16.1||19.1||(3) times|
|8||P/B (times) adjusted||1.9||1.8||(0.1)time|
|Market price on Sep 30th (adjusted)||48,000||44,690||7.4%|
For the first time since the pandemic outbreak, accumulated total net revenue and other income of Imexpharm dropped. In details, net revenue and income of Imexpharm in 9 months attained 893.3 billion dong, reduced by 1.1% year over year and only reached 51.1% of total annual plan (1,750 billion dongs) set by the General Meeting of Shareholders. Currently, it is very struggling and nearly impossible for Imexpharm to meet the target of 1,750 billion of net sales and income. However, the company has been putting all efforts to push revenue to go up in quarter 4 in order to ensure that revenue is still rising in 2020 despite the low growth rate. ETC has developed rapidly in 2020 at 51.1% growth rate, but it could not compensate the crash of OTC at 15.5%. The impacts of second spread of the pandemic on Imexpharm sales are very serious according to the assessment of the Management Board.
Imexpharm profit grew more positively than revenue. As of September 30th, 2020 total profit before tax of Imexpharm attained 164,3 billion dong, increased 21.8% compared to corresponding period of the earlier year and accounted for 64.3% annual plan of 260 billion dongs. High growth rate of profit in the context of fluctuated market is mostly caused by saving costs. To make it clear, selling expenses dropped 24.3 billion dongs which was corresponding to 15.7%. Administrative expensed also declined by 7.5%. on the other hand, cost of goods sold went down by 2.5% mostly originated from decrease in revenue.
Total asset and owner’s equity of Imexpharm both grew in first 9 months of 2020. Rises in assets are coming from recording new assets for IMP4 factory and increase in stockpile to make a provision for price upward trend and in account receivables. Owner’s equity went up 4.7% compared to the figure of beginning of the year, due to increase in accumulated profit after tax not for 9 months.
In quarter 3, profit distribution and dividend paid of 20% (10% by cash and 10% by stocks) together stock awards to shareholders (20% of the charter capital distributed from share premium) make the charter capital increase 30%, share premium decrease 16.4% and investment and development fund rose 15.6%.
After paying dividend and accumulating profit after tax for 9 months, undistributed earnings dropped by 14.5%.
Liquidity ratios of Imexpharm were kept at safe level; however, current ratios slight decreased compared to the corresponding period of last year while quick ratio was stable.
Profitability ratios of Imexpharm were increasing in comparison with the same period of 2019. ROS rose 3.3% while ROE, ROA (4 latest quarter) grew faster after a long time the Company concentrated to invest for new factories.
Adjusted EPS following the outstanding shares increase 27.6% year over year. Current BV of Imexpharm was 25,145 dong, BV of 2019 after being adjusted was 23,460. BV also rose 5.2%.
Adjusted P/E was dropped 3.4 times while P/B increased slightly, Imexpharm stock has recovered considerably after new issuances. Compared to closing price of September 30th, 2019, closing price of last round in quarter 3 increased 7.4%.
2. Imexpharm operation update in quarter 3 of 2020
At the beginning of quarter 3, Imexpharm restarted customer care programs after being disrupted by the pandemic, these programs to boost OTC sales revenue. However, the pandemic outbreak at the end of July has made all activities stuck and OTC revenue dropped dramatically.
In quarter 3, Imexpharm continues to implement guidelines and directions of the Government with the motto of health safety first. The employees especially who lives in the pandemic region always received timely cares and directions to limit maximally dangers of infection.
Imexpharm success in quarter 3 is to maintain business activities stably and continuously although market has some disadvantageous movement. In addition, the Company has taken prompt actions to ensure safety for all employees in the pandemic.
3. Imexpharm strategies in Q4/2020
Focusing strategies in Q4 is remaining controlling and cutting expenditures, implement saving measures to meet profit target. On the other hand, the Company also concentrates on manage cash flow and account receivables to ensure sufficient cash for business operations.
Furthermore, the Company has policies to organize seminar, conferences, medical forum to stimulate OTC channel after deeply dropping induced by the pandemic.
The Company will closely follow up IMP4 EU-GMP inspection and construction schedule and functional food factory to meet the timeline being set.