Company Quarterly Earnings Update – DHG VN – 2020

Summary of the 2020 results of Hau Giang Pharmaceutical JSC (DHG VN)

2020 results highlights:
  • Net revenue was VND3,756bn, -3.6% y/y mostly due to changes in booking policy, while net profit posted 17.0% y/y growth, 3.2% higher than our expectation. The main cause for the decline in revenue was a change in commission form for distributors. Since Q2, travel packages, which were usually offered as commissions for distributors, could not be held due to travel restrictions amidst the pandemic. As a result, DHG lowered its selling prices instead. The two groups that contribute the most to revenue are anti-biotics with 40% and pain/fever relief with 20%.
  • Since Taisho Pharmaceutical Co. Ltd. became shareholder in 2016, DHG has been upgrading its production standards. By now, it has close to 100 drugs produced in Japan-GMP standard facilities, in its drug portfolio of more than 300.
  • Profitability was not affected by the above-mentioned change in commission form. In addition, certain medicines that were in high demand during the pandemic, such as immune-system enhancing supplements, generally had higher margins.
  • The financial position remained solid: cash and deposits were 48.3% of total assets, and leverage was minimal (D/E and D/A of 0.06x and 0.05x respectively).
  • A new wave of COVID-19 infection has started again in Vietnam from 27 January 2021. However, thanks to Vietnam’s aggressive contact tracing and quarantine measures, Deputy PM Vu Duc Dam is confident that the government will contain the outbreak before Lunar New Year. In addition, vaccines, which will be available soon,.
    will help most businesses to resume their activities to pre-COVID-19 level
  • The long-term trend of Vietnam’s pharmaceutical spending is promising, given the low base of $69 per capita in 2019. Growth venue will be public auction for national insurance scheme in hospitals for prescription medicines and pharmacies for supplements.
  • We expect DHG net profit to grow by 6.2% in 2021 and 8.4% in 2022.

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