What launchpad for IMP?

Despite a 21.5% decrease in pre-tax profit in Q1/2024 compared to the same period last year, IMP is still on track towards a record business plan.

Profit Decline

In Q1/2024, IMP recorded a 2.5% rise in net revenue over the previous year, totaling 491.1 billion VND. The cost of items supplied in Q1 climbed by 25%, since the IMP4 facility commenced depreciation in July 2023 and API raw material prices remained high until early 2024. These are the primary causes for the profit drop during the time, resulting in a lower gross margin.

At the conclusion of the first quarter, IMP's pre-tax profit fell 21.5% year on year to 78.58 billion VND, attaining 21% and 18% of its 2024 annual target, respectively. According to IMP, competitive market circumstances led to the earnings drop.

In truth, all pharmaceutical businesses reported reductions in business results in Q1/2024, despite the fact that 2023 was a year when several companies in the industry generated record earnings, providing a strong comparative foundation. In 2023, IMP's total revenue increased by 26% to 2.113 trillion VND, while net profit increased by 34.0% to 300 billion VND.

By the end of 2023, after five months of operation, the IMP4 factory had attained 61% of its operational capacity and generated 80 billion VND in income. While the IMP1, IMP2, and IMP3 facilities have not yet achieved full capacity, IMP has plenty of opportunity to sustain robust expansion until 2024. Thus, despite a slowdown in Q1/2024, IMP is still on track to meet its objectives for 2024.

Long-term advantage. For 2024, IMP has set a gross income target of 2.630 trillion VND, a 24% increase. The OTC channel contributes 1.214 trillion VND (up 12%), whereas the ETC channel gives 1.216 trillion VND (up 49%).

IMP's advantage is that it owns the most EU-GMP certified production lines in Vietnam, allowing its drug lines to completely "dominate" the hospital channel (ETC - prescription drugs, via tenders), contributing to IMP's record growth and "balancing" at a time when the OTC channel is saturated.

Furthermore, Dr. Tran Thi Dao, CEO of IMP, stated that, in addition to expanding the list of raw material suppliers and developing competitive pricing strategies to increase ETC market share over the next five years, IMP is considering investment opportunities in new factories outside of the current four clusters to increase capacity to meet future customer demand.

IMP's recent growth from the ETC channel has been driven by both external and internal reasons. The appropriate internal benefits have been highlighted above, in line with external considerations such as higher healthcare demands and medicine consumption following Covid-19. Healthcare legislation and tenders also make it easier for investors and enterprises to get enough medicine supplies. Notably, the usage of antibiotics in hospitals continues to be high, as supplied by IMP's EU-GMP plants. This demonstrates that IMP's investment strategies throughout time have served as a springboard for achieving wider corporate objectives.

Based on many favorable factors, such as demographics, national healthcare goals, and advantages in antibiotic production, PHS predicts that IMP will continue to record good growth in 2024.

"IMP is a domestic firm with the highest tender value in the sector's ETC channel for Q1/2024, exhibiting greater capacity and competitiveness when compared to domestic enterprises in ETC medicine tenders. We believe IMP will continue to grow well in 2024 due to (1) domestic drugs being prioritized in tender structures due to government policies; (2) strong growth from the ETC channel; and (3) EU-GMP certified factories providing long-term growth potential." PHS analyzes and recommends purchasing IMP stock at a reasonable price of 77,200 VND/share.

It is known that IMP is now among the top 8% of domestic pharma makers that fulfill tender requirements for groups 1 and 2 in the ETC channel. This is a "star" stock in the pharmaceutical sector, with extraordinary stock gain despite disappointing Q1 business performance.

As of June 10, IMP stock was trading about 69,700 VND per share. Investors are interested in this company not only because it is one of the best in the business with long-term development potential, as assessed by KBVN, but also because of the 20% dividend distribution plan that is projected to be executed from Q2 to Q4 2024.