DHG PHARMACEUTICAL
Ho Chi Minh Stock Exchange (HOSE)
Closing price:
USD/VND:
Target price:
Recommendation:
COMPANY OVERVIEW
FIGURE1: MARKET PROFILE
T icker
DHG
Share Outstanding (mil)
Hau Giang Pharmaceutical Joint Stock Company (DHG
Pharma) originated from the state-owned pharmaceutical
enterprise 2/9 and was established on September 2, 1974. After
nearly 50 years of operation, DHG Pharma has maintained its
leading position in the Pharmaceutical Industry in Vietnam in
terms of revenue, profit and production capacity.
DHG Pharma owns a team of highly qualified and capable
officers and employees who are always devoted to the company.
Thanks to that, DHG Pharma was able to produce large batches
of products, shorten the production cycle, save costs and
optimize business capital for production activities.
Currently, DHG Pharma has more than 300 products circulating
nationwide, divided into 12 product groups. Product groups
include antibiotics, anti-parasitic fungi, nervous system, pain
relief - fever reducer, eyes, ENT - asthma, runny nose,
cardiovascular, diabetes, digestive - hepatobiliary, muscle bones
and joints, beauty care, dermatology, vitamins and minerals.
130,75
Market Cap (bli VND)
14 447,44
91,00 – 140,00
52-week price range (VND)
Dividend Yeild
3%
LT M P/E
Source: Investing
FIGURE 2: VALUATION
Price (VND)
Weight
FCFF
P/E
SO TD
149 870
119 487
50%
50%
T arget price
134 679
Current price
112 800
Upside
19,40%
Recommendation
VISION AND MISSION
BUY
Source: Team estimate
FIGURE3: SHARE PRICE
MOVEMENT
Vision of DHG Pharma company: "For a better life"
Mission of DHG Pharma company: "DHG Pharma always
provides high quality products and services that satisfy the
desire for a healthier and more beautiful life."
Core values of DHG Pharma: Throughout the development
process, DHG Pharma always upholds 6 core values including:
Take quality, safety and efficiency as the highest commitment
Use knowledge and creativity as the foundation for development
Take responsibility, cooperation, and compensation as the motto
of action
Taking Hau Giang Pharmaceutical Identity as company pride
Take prosperity with partners as a long-term goal
Take outstanding differences as a competitive advantage
Take community interests as the starting point for all activities
COMPANY STRATEGY
Enhance brand value through increasing domestic market
share, expanding exports, and exploiting distribution system
advantages
In today's competitive business environment, enhancing brand
value is crucial for long-term success. One effective way to
achieve this is by increasing domestic market share, expanding
exports, and exploiting distribution system advantages. By
reaching more customers both locally and internationally, a
company can solidify its position in the market and increase
brand recognition.
2019
2020
2021
2022
2023
Net Revenue
(VND Billion)
3,896
3,755
4,003
4,676
5,105
Gross Profit
1,722
1,811
1,920
2,257
2,343
Gross Profit
Margin
43,94%
48,23%
47,98%
48,28%
46,73%
Net Margin
16,2%
19,66%
1939%
21,14%
20,97%
EPS
4,828
5,649
5,937
7,560
8,042
ROE
18,3
20,4
20,27
22,9
21,5
VALUATION - GROUP 4
1
FIGURE 4: DHG'S HISTORICAL P/E
COMPANY STRATEGY
DHG
PHARMACEUTICAL
Source: Company data
FIGURE 5: DHG'S PROFIT AFTER TAX
FIGURE 6: DHG'S OWNERSHIP
STRUCTURE
Source: Company data
Maximize
production
capacity and
efficiency and product
Ho Chi Minh
Stock Exchange
(HOSE)
quality
Another important aspect of enhancing brand value is
maximizing production capacity and efficiency, as well as
product quality. By continuously improving these areas, a
company can meet customer demands effectively and maintain
a strong reputation for delivering high-quality products.
Maximize the capacity and efficiency of business
management, financial management, and supply chain
management
Furthermore, maximizing the capacity and efficiency of
business management, financial management, and supply chain
management is essential for sustainable growth. By investing in
these areas, a company can streamline operations and improve
overall performance.
Expand investment cooperation towards diversification
Additionally, expanding investment cooperation towards
diversification can help a company stay competitive in a rapidly
changing market landscape. By exploring new opportunities and
markets, a company can further enhance its brand value.
Fulfill social and environmental responsibilities well
Moreover, fulfilling social and environmental responsibilities is
becoming increasingly important for companies looking to
enhance their brand value. By demonstrating good corporate
citizenship and sustainability practices, a company can build
trust with customers and stakeholders.
Carry out good responsibilities towards employees
Lastly, carrying out good responsibilities towards employees is
crucial for maintaining a positive work culture and retaining top
talent. By investing in employee development and well-being, a
company can create a strong team that supports the overall
success of the business.
INDUSTRY OVERVIEW
Source: Company data
The pharmaceutical sector in Vietnam has grown
rapidly, averaging roughly 10% annually between 2016 and
2022. A thorough analysis estimates the annual value of
the Vietnamese pharmaceutical market to be between 6.2 and
6.4 billion USD. By 2026, it is anticipated that
Vietnam's pharmaceutical market would generate 16.1 billion
USD. VIRAC's report states that this industry group's
industrial production index grew at a rate of almost 7% in the
first quarter of 2023 compared to the same period the previous
year.
The hospital channel (ETC) and the retail channel are the
two primary segments of Vietnam's pharmaceutical market
(OTC). The ETC channel has a market share of roughly 60% and
is growing at a rate of about 12% annually on average. The overthe-counter (OTC) channel holds approximately 40% of
the market share and is growing at an average annual rate of
8%.
Vietnam
will
have
228
domestic
pharmaceutical
manufacturing companies and about 51 foreign-invested
pharmaceutical manufacturing companies by 2023. Of them,
eighteen—including EU, PICS, JAPAN, and TCA—meet stringent
GMP standards.
VALUATION - GROUP 4
1
FINANCIAL ANALYSIS
Steady Net Revenue Growth Platform And Wise Investment To Fuel
Sustainable Revenue Growth
The Covid-19 pandemic has changed the world, direct ly impact ing the global
economy and international trade negatively. While most businesses struggled due to
Covid-19, some, like Hau Giang Pharmaceutical (DHG Pharma), managed to go
against the tide and thrive by leveraging their strengths to gain more market share.
During the three years of the Covid-19 outbreak in 2020-2021-2022, the
pharmaceutical industry faced challenges such as production disruptions, supply chain
breakdowns, and reduced hospital channel demand due to social distancing measures.
Against the odds, Hau Giang Pharmaceutical continuously achieved positive business
results over these three years thanks to their strategy of ensuring a reserve of raw
materials, stabilizing the supply chain, transportation, and production activities with
the support of their information system. Part icularly in 2022, DHG Pharma
experienced imp ressive growth with a net revenue of 4.676 VND, an increase of
nearly 17% co mpared to 2021, demonstrating strong recovery and growth postpandemic. This excellent performance was driven by the Pharmaceutical sector (84%)
and the Health Food sector (11%). The leading position that DHG Pharma has
achieved is convincingly demonstrated across various aspects, fro m business strategy
to expansion and growth. Therefore, we expect DHG's net revenue to grow at the
highest rate of 8.9% during the 2023A-2028F period.
The leading pharmaceutical enterprise in Vietnam has maintained
a relatively superior and stable ROE
With a sensible business strategy, along with own ing an additional Betalactam factory
that meets Japan/EU-GMP standards, Hau Giang Pharmaceutical has further increased
its competitiveness in the domestic pharmaceutical market. It not only maintains the
number one position in the country's pharmaceutical industry but also steadily steps
into the global pharmaceutical market. Thanks to these outstanding advantages, DHG
can ensure a higher ROE co mpared to other co mpanies in the same industry (~ 1 to
1.5 t imes). Although the investment in starting the construction of
Source: Company data, Team estimate the Betalactam factory meeting the JAPAN/EU-GMP standards has slightly slowed
down the ROE growth rate, we believe that with continuous innovations, the ROE
could reach an increasing trend from 21.52% in 2019 to 22.37% in 2028. This
impressive performance is primarily fueled by the following factors:
Leverage is healthy and generates strong cash flow to expand financial
capacity
The debt-to-total assets ratio of DHG fro m 2019A-2023A has varied, decreasing the
burden of interest on loans as well as reliance on borrowed capital to invest in assets,
which is seen as a good sign for the company. Additionally, in 2019, the debt-toequity ratio was 0.21, wh ich increased to 0.23 in 2020, then decreased to 0.2 in 2022,
but surged to 0.24 in 2023. Th is could indicate that the co mpany is increasingly using
debt compared to its own equity, especially in 2023. Also in 2023, DHG's total assetto-equity ratio showed slight fluctuations but remained stable, indicating that the
company is making good use of financial leverage to support its business operations.
Although DHG's D/ E ratio is projected to increase fro m 0.23 (2024A) to 0.27
(2028A), this ratio is always below 1 and lower than the industry average (1.37),
showing that the strategy of using a capital structure without financial leverage can be
ready to support continuous capacity expansion.
VALUATION - GROUP 4
1