Summary of the Q3/2022 results of Hau Giang Pharmaceutical JSC (DHG VN)
9M/2022 Result & Outlook
- 9M/2022 Net revenue increased by 15.0% y/y to reach VND3,346bn. The double epidemic of dengue fever and COVID has increased the consumption of COVID/flu products as well as vitamins/supplements for post-COVID/flu recovery. A further contributor to DHG’s revenue growth was its uninterrupted supply chain, which allowed DHG to secure a top-3 market positioning. The gross margin improved to 48.9% thanks to a greater sales contribution from its owned products which have higher margins. Overall, net profit amounted to VND752bn, +24.2% y/y.
- Financial position remained solid: Cash & short-term investments accounted for 45.2% of total assets, with minimal leveraging levels (D/E and D/A ratios of 01x and 0.01x respectively).
- Construction of the new betalactam factory is still running as planned: DHG has completed the land clearance stage and is proceeding with the ground filling phase. The total investment cost is VND920bn, financed by DHG’s retained earnings. The factory is expected to begin commercial operations in 2025 under GMP-EU standards.
- In the short-term, demand for COVID/flu products will remain at a relatively high level as dengue fever infections remain severe and COVID is not fully eliminated yet. In the long term, we expect the demand for COVID/flu products to normalize, and vitamins/supplements will become the primary drivers for OTC sales. Meanwhile, ETC sales will increase thanks to higher health insurance coverage.
- We revise our forecast up by 2.6% for 2022 and up by 2.1% for 2023 total sales to reach VND4,470bn (+11.7% y/y) and VND4,847bn (+8.4% y/y) respectively, deriving from stable demand for its major products as well as the increasing variety of supplements owing to cooperation with Taisho. Following the trend of rising API prices, DHG is planning to stock up its inventory and increase selling prices to secure its gross margin. The recent depreciation of the VND against the USD will also impact the API import price. Hence, we estimate 2022’s gross margin will be 49.4% and we reduce 2023’s projection to 48.8%. Financial income will reduce due to Capex spending. All in all, we expect the 2022 and 2023 net profit to stand at VND952bn (+22.6% y/y) and VND991bn (+4.1% y/y) respectively.
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