YSPSAH vs DPHARMA, which pharma company is better?

When it comes to choosing a listed pharmaceutical company to invest in Malaysia, most peoples would go for DPHARMA, or PHARMANIAGA. These names are popular, as both companies are able to secure huge government contracts to supply generic drugs to government hospitals.

Almost nobody would even bother (or aware) about this small pharmaceutical company in Malaysia, i.e. YSPSAH, especially during the recent years where its reporting net profit plummets. 

In this blog, I wish to compare YSPSAH against its competitor DPHARMA in various financial metrics.

(1) Reported and Core Profits

As shown in figure below, the reported net profit of YSPSAH is very unstable lately, while the reported net profit of DPHARMA is uptrending. No wonder many investors out there would prefer to have DPHARMA in their portfolios.

Let us pause for a little moment and analyze why YSPSAH's earnings is so fluctuative. 

According to the Management, its 30% of revenue is derived from overseas, which is dominated in USD. So, its reported earning would be subjected to the currency rate fluctuation (e.g. USD vs MYR) inevitably, depending on the forex rate when the invoice is issued to the foreign customers and the forex rate at the account closing date. I noticed that YSPSAH has reported quite a substantial amount of "unrealized" forex loss lately as below. As seen, the unrealized forex loss is at record high in year 2025 at RM 15M due to the stronger MYR against USD. Here is the key, all this forex loss is unrealized, which is yet converted to MYR. According to the Management, YSPSAH practices natural hedging so far, where the received USD would be used to purchase raw material in USD.

When analyzing the real operating performance of a company, the use of reported net profit is quite misleading sometimes, especially for those companies that are export-oriented. Core profit would be more useful in this regard. To get the core profit, I have added the unrealized forex loss to the reported net profit (Note that for unrealized forex gain, I would deduct it from the reported net profit instead). 

Figure below shows the reported and core profits of YSPSAH. In 2024 and 2025, there is a divergence in the trends of reported and core profits. In general, the core profit of YSPSAH is at record high in year 2025. Although the core business of YSPSAH is still performing well, Mr. Market has sent the share price of YSPSAH to its multi-year low level in 2025 as YPSAH's reported profit attributed to shareholders plummets due to huge amount of unrealized forex losses. This indicates that Mr. Market would pay more emphasis to reported profit as compared to core profit. This has in turn created a good opportunity for serious value investors out there to buy a good company at low price.

Meanwhile, the core profit of DPHARMA is almost similar to its reported profit attributed to shareholders as DPHARMA's business is mainly in Malaysia. In general, the uptrending pattern DPHARMA's profit is more consistent than YSPSAH, possibly due to consistent award of government contracts. For YSPSAH, in FY2024, only 13% of revenue is derived from government contracts.

(2) Gross Profit Margin & Core Profit Margin

API is the main raw material used in pharma industry. Nowadays, most likely, a pharma company would procure API from China (previously from Ukraine). Let us look into how well these 2 companies managing their material costs. Figure below shows the gross profit margin of YSPSAH and DPHARMA. Since 2017, YSPSAH outperforms DPHARMA in terms of gross profit margin. In FY2025, YSPSAH gross profit is around 44%, while DPHARMA is around 39%.

On the core profit margin, again, YSPSAH has outperformed DPHARMA in the most recent 4 years (2022-2025). YSPSAH experienced a drop in core profit margin during Covid period, which could be due to lock-down in overseas market.

(3) Return of Equity (ROE)

The ROE of DPHARMA is generally higher than that of YSPSAH as shown below. 

Let us analyze the ROE further by using the DuPont formula that breaks down ROE into three key drivers: 

(a) Profit Margin (Profitability) = Profit/Revenue 

(b) Asset Turnover (Efficiency) = Revenue/Total Asset

(c) Financial Leveraging (Leverage) = Total Asset/Total Equity

Profit margin (a) has been analyzed earlier. The core profit margin of YSPSAH in FY 2025 is larger than that of DPHARMA, as shown in previous section.

For (b) Efficiency:

YSPSAH is seemingly more efficient than DPHARMA in terms of asset turnover. 

For (c) Leverage:

Apparently, DPHARMA's ROE is higher than YSPSAH's because the financial leveraging of DPHARMA is relatively high, which is around 200%. The leverage of YSPSAH in year 2025 is only around 130%.

Why DPHARMA's leveraging is so high? It is found that DPHARMA has been borrowing quite a substantial amount to boost up its sales and profit. Note that its gearing (= total borrowing/equity) is as high as 65% in FY 2025 (see below), and it is ~ 6x higher than that of YSPSAH's gearing (~11% in 2025). In other words, YSPSAH is quite prudent in bank borrowing, and it is relying mainly on improving (a) Profit Margin (Profitability) and (b) Asset Turnover (Efficiency) to improve its ROE.

(4) Return of Invested Capital (ROIC)

K.C. Chong, a renowned value investor in Malaysia, has been advocating the use of ROIC to gauge the quality of a company in generating profits by using the total invested capital (including the use of debts). ROIC can be calculated as: ROIC = Core Operating Profit/Invested Capital, where Invested Capital = Inventory + Receivable - Payable + Fixed Asset. Fixed Asset consists of Property, Plant and Equipment (PPE), rights-of-use assets, etc. You may find more explanation about ROIC from his book.

Clearly, while YSPSAH's ROE is lesser than DPARMA's ROE, the ROIC of YSPSAH is apparently higher than that of DPHARMA, which could indicate that YSPSAH is better in managing the invested capital to generate profit.

(5) Free Cash Flow (FCF)

For a value investor, the main intention to invest in a company is to get consistent (and hopefully growing) dividends from a company. When dividend is growing, the share price would follow (hence capital gain). A good company would pay dividends from the generated free cash flow (FCF), not from bank borrowings. Figure below shows the FCF per share for YSPSAH and DPHARMA. Undoubtedly, YSPSAH is superior to DPHARMA in this regard. That could be the reason YSPSAH is able to pay high dividends to shareholders every year. At the current share price (RM 2.08, date: 1 May 2026), the dividend yield is ~ 5.3%.

(6) Historical PER

Figure below shows the historical PER (= Core Profit/Earnings Per Share). In general, DPHARMA commands a higher PER most of the time as it is one of the market's favourite. Its PER shoots to almost 40x during Covid period, possibly due to the vaccine supply. After 2020, its PER seems to normalize to pre-Covid level. YSPSAH, on the other hand, is currently trading at single digit PER, as it was experiencing a heavy sell-off in FY 2024 and FY 2025 after its reported profit drops significantly due to huge amount of unrealized forex loss. The low trading liquidity of YSPSAH is another reason why it could not attract big funds at the moment, leading to low PER.

Conclusion

(1) Core profit: DPHARMA shows a more stable uptrend of core profit, as compared to YSPSAH. YSPSAH's reported profit is bumpy due to forex fluctuation (30% export); however, its core profit is uptrending in general.

(2) Gross & Core profit margins: YSPSAH profit margins are relatively higher than those of DPHARMA.

(3) Return of Equity (ROE): The Return of Equity (ROE) of DPHARMA is higher than that of YSPSAH. Based on the DuPont analysis, the higher ROE of DPHARMA is due to its high financial leveraging. In other words, DPHARMA relies mainly on debts (or borrowings) to drive the business. The above observation can be supported by its high gearing of 65% in FY2025 (vs 11% in FY2025 for YSPSAH).

(4) Return of Invested Capital (ROIC): YSPSAH is more efficient than DPHARMA in using the invested capital to generate profit. The ROIC of YSPSAH in FY2025 is 16% (vs. DPHARMA of 13%)

(5) Free Cash Flow (FCF) per share: YSPSAH is generating significantly higher FCF per share (RM 0.36) than DPHARMA (RM 0.08).

(6) Historical PER: Valuation wise, YSPSAH is cheaper undoubtedly. Market seems to abandon YSPSAH most of the time, especially during the period when MYR is strengthening against USD. This is the period where YSPSAH will report significant forex loss. The key is that this forex loss is "unrealized".

Based on the above, it would give a clearer picture to my family members in selecting which company to invest in pharma industry in Malaysia. In the recent Annual Report 2025 of YSPSAH, I notice that Mr. Kong Goon Khing has emerged as one of the top 30 shareholders (5th largest shareholder). A quick fact find from Google suggests that Mr. Kong has owned other companies such as AEONCR,  HUMECMT, MNRB, etc. From his shareholdings, I believe Mr. Kong is a value investor.

During the AGM held in 2025, Dr. Lee (MD of YSPSAH) has mentioned that the company is constructing a new sterile line and he has expected that this line can start to operate in 2026. A huge prepayment of RM 19M has been allocated for PPE, as outlined in the Annual Report 2025.