Herbal medicine companies are enjoying huge profits per year thanks to stable input costs compared to other industries.

According to a recent report by SSI Research, herbal medicine businesses are less affected in a high inflation environment, with stable input costs compared to other industries. From the financial statements of listed pharmaceutical companies in Viet Nam, the average input cost of most pharmaceutical companies remains at a similar proportion, of which 60 per cent is the cost of raw materials.

Although the cost of raw materials accounts for the largest proportion, it is divided into many different types of active ingredients and pharmaceuticals. As a result, the cost composition of the final products will be very fragmented, unless there is a significant disruption in the supply chain of the raw material.

The opening of international flights helps speed up M&A deals. Therefore, SSI said that Vietnamese listed pharmaceutical companies with a consolidated shareholder structure and the attention of foreign investors will have a high valuation, creating a safe investment channel for investors in the current volatile market period.

Among the herbal medicine companies, Traphaco JSC (TRA) has always maintained its leading position in terms of profit for decades. The typical pharmaceutical brands that Traphaco owns are Boganic, Hoat Huyet Duong Nao (nourishing brain), Tottri and Ginger Tea. In 2021, Traphaco's revenue reached VND2.16 trillion, profit after tax totaled VND264 billion (US$92.4 million), an increase of 22 per cent compared to 2020 and was the highest profit ever.

The company attributed the rise in profit to strengthened financial management through budget planning, reducing inefficient and wasteful costs, and allocating adequate costs to promote business activities, ensure the completion of the annual profit plan, rising sales of key products, and good profit margins.

Traphaco's earning per share (EPS) in 2021 was VND5,177, higher than OPC Pharmaceutical JSC (OPC) with EPS of VND4,742.

In second place was OPC Pharmaceutical JSC (OPC), in 2021, OPC's net revenue reached VND1.12 trillion, up 17 per cent over the same period last year, the highest ever. Profit after tax touched a record of VND123 billion, up 20 per cent year-on-year.

Foripharm this year ranked third after OPC Pharmaceutical JSC (OPC). In terms of revenue, Foripharm earned around VND400 billion in 2021. In the last two years in 2020 and 2021, Foripharm's gross profit margin has always stayed at 69 per cent. Foripharm attributed the high profit margin to high proportion of sales of self-manufactured goods, accounting for over 90 per cent. Foripharm's dividend payout ratio was also the highest in the industry with a cash dividend of 60 per cent in 2021 and a plan of 40 per cent for 2022.

Nam Duoc JSC has multiple well-known products derived from traditional herbal medicines such as Thong Xoan Tan, Nam Duoc Cough Medicine and Diabetna. In 2021, despite many difficulties due to the COVID-19 pandemic, NDS still reported good business results, especially in the last six months of the year when the demand for products rose.

As a result, the company's revenue set a record since its inception, reaching VND640 billion, equivalent to an increase of 16 per cent over the previous year. However, after-tax profit somewhat slowed down, reaching more than VND68 billion, exceeding the set plan but decreasing by more than 5 per cent compared to 2020.

Not only focusing on the core product of herbal medicine, Nam Duoc JSC continues to expand into the cosmetic segment. In 2021 it started to invest in production lines of specialied products for treating endemic diseases, such as Emhappy Feminine Hygiene Solution, Timazgel Acne Gel and Ich Nhi Shower Gel.

The company said this segment was the strength of Vietnamese pharmaceuticals, which have great potential and will be a driving force for the company's development.

Nam Ha Pharmaceutical is well known for its cough medicine products and Nam Ha cough syrup. Although the charter capital is only VND52 billion, the company's revenue for the last four consecutive years was approximately VND1 trillion per year. However, the profit stayed low, in 2021 the company achieved a profit of VND30 billion. VNS