YSPSAH Q2-2026 result

 

Let us have a look on the Q2-2026 quarter report released by YSPSAH.

Both the quarter revenue and quarter reported profit jump yoy. While the revenue jump yoy is mainly derived from stronger overseas sales (particularly from Vietnam, Cambodia and Africa), the reported profit jump yoy is mainly attributed to the very weak reported profit in Q2-2025 due to forex loss (during that time, USD is weakening against MYR as Fed reduces interest rate in the US). Recall that YSPSAH's ~30% of revenue is derived from overseas. So, weak USD will drag the reported net profit, as YSPSAH needs to report on the unrealized forex loss. Meaning to say, they still keep the USD received from customer (without converting to MYR). But the value (in terms of MYR) of the USD received is getting lesser -- > so unrealized forex loss.

As I always mention, the reported profit is quite misleading due to non-cash items. Unrealized forex loss is one of the non-cash items. So, it is better to look into the core profit instead. The calculation of core profit would require more work:

From the table above, I purpose highly the foreign exchange item to highlight the remarkable forex loss experienced by YSPSAH in Q2-2025 of ~ RM 7.135 million. The Management tends to combine both realized and unrealized forex loss here. When doing core profit calculation, I tend to consider only the unrealized forex part. Unfortunately, unlike their annual report, the quarter report of YSPSAH does not provide further info on the unrealized forex. But, according to my study, YSPSAH's realized forex part is less significant as compared to the unrealized forex part.

Let us do the core profit calculation as follow:

Q2 2026  (number in '000):

Core profit = reported profit + Adjustment 

Reported profit  = RM4262

Adjustment = + RM 833 (only consider forex part here)

So, core profit = RM 4262 + RM 833 = RM 5095 (number in '000)

Q2 2025  (number in '000):

Core profit = reported profit + Adjustment 

Reported profit  = RM 746

Adjustment = + RM 7135 (only consider forex part here)

So, core profit = RM 746+ RM 7135 = RM 7881 (number in '000)

So, for core profit wise, Q2 2026 is weaker than Q2 2025 !

What has went wrong in this quarter?

If you look at the table above, you would notice that a few categories are highlighted in RED. Did you see that items like cost of sales (raw material cost), selling expenses and admin expenses all went up during Q2 2026?  I believe the surge of selling & admin expenses is due to higher logistic and distribution cost due to Iran war, as YSPSAH needs to export the drugs to other countries. So, more logistic cost is required, and this is understandable during the current condition. However, what has puzzled me is the cost of sales, which is increased by 13.6% (while revenue increases by 8.5% only). By right, as USD is weakening, YSPSAH needs to fork out lesser MYR to buy the API (raw material), which would contribute to lesser cost of sales right? Or, perhaps the cost of API (in terms of USD) has increased even sharper?? I am not too sure though...  Nevertheless, weak USD would translate to lesser MYR received as well, so Management may need to adjust the USD pricing of those exported drugs upward to protect the gross profit margin. Perhaps the adjusted pricing is not sufficient to cover the increased API cost?

So, my conclusion is the weak Q2-2026 result is due to increased cost.

How about DPHARMA, which mainly focuses on domestic sales (> 90 % local)?

Cost of Sales / Revenue %

In general, YSPSAH recorded lower Cost of sales / Revenue % as compared to DPHARMA. Normally, when USD is getting stronger against MYR (hence weaker MYR), DPHARMA would suffer due to high input cost (see FY 2023). However, as USD is weakening nowadays (after Fed cuts rate), the gross profit margin of DPHARMA would increase again. For YSPSAH, they practice natural hedging, so the currency fluctuation does not matter much. The only caveat is the highly fluctuating reported earning (due to unrealized forex loss/gain), where most investors do not like to see.

Admin Expenses / Revenue %

In general, YSPSAH recorded lower Admin expenses / Revenue % as compared to DPHARMA. However, do note that DPHARMA is getting more efficient now in terms of admin cost management, and the ratio is almost on par with YSPSAH.

Sales and Distribution Expenses / Revenue %

DPHARMA spends less in terms of distribution cost (relative to its revenue) as compared to YSPSAH, which I believe so because DPHARMA focuses mainly on local market. Lesser logistic effort is required as compared to YSPSAH.

Core Profit Margin %

While YSPSAH core profit margin is better than DPHARMA from FY2022 to FY 2025, the two recent quarters in FY 2026 (Q2 2026 in particular) have witnessed weaker core profit margin as compared to DPHARMA. I believe it is due to the elevated input and logistic costs experienced by YSPSAH.

Conclusion

Indeed, investing in YSPSAH really test one's patience. Frankly, I have made a wrong move in FY 2023 by buying quite a lot of YSPSAH shares after I noticed that there is a huge capex being spent (RM 31 M to buy a factory + land from Onkio Electronics). Now, this property is merely used for warehouse purpose... So, do not invest only based on huge capex being spent. We must make sure the capex can be used to generate profit for shareholders.

Fortunately, there is a growth story of YSPSAH recently. Management is ready to run the new injection plant II at the end of FY 2026, which is constructed in its current manufacturing facility. This new injection plant II is used to support the older manufacturing facility which is not working properly. According to the management, once the new injection plant II is running, the older manufacturing facility will be renovated.

All the best, YSPSAH!!