Company Quarterly Earnings Update – DHG VN – 2018 Q3

Summary of the 9M 2018 results of Hau Giang Pharmaceutical JSC (DHG VN) 

9M/2018 results: highlights
  • Net revenue was VND 2,669 bn, -1.5% y/y. Own product revenue (83% of total revenue) grew by 6% y/y, while the remainder of DHG’s revenue declined by 20% y/y because of the dropout of trading medicine revenue. DHG removed the trading medicine business line in order to be qualified for the foreign ownership limit (FOL) lifting.
  • Profit before tax amounted to VND 512 bn, +3.2% y/y, growing faster than revenue thanks to improved efficiency and thus lower operating expenses. The bottom line was however down by 9.9% y/y as the company paid most  of its 2017 taxes in Q4 due to last year’s tax dispute. This year, tax expenses were distributed more evenly among the quarters.
  • DHG’s financial position remained solid with a large amount of liquid assets (cash and deposits made up 37.6% of total assets) and a low leverage (D/E and D/A of 0.21x and of 0.15x respectively).
Other developments
  • The FOL was fully lifted from 3 Jul 2018. Thereafter, Taisho Pharmaceutical Co., Ltd. increased its stake to 34.3% after making a tender offer for a 7.0% stake at a price of VND120,000/share; afterwards, Taisho purchased an additional 2.3% stake through the open market.
  • DHG’s prospects remain bright thanks to strong demand for reasonably priced generic drugs (IQVIA estimates a CAGR of 9% during 2017-2021). What is more, the recent launch of some skincare products in cooperation with Taisho’s partners have opened the cosmetics and the supplements market. However, cosmetics currently account for less than 10% of DHG’s revenue.
  • The 2018 and the 2019 bottom lines are estimated to reach VND 674 bn (+4.8% y/y) and 741 bn (+9.9% y/y) respectively.

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