Following our recent meeting with management, including the newly appointed CEO, we have increased confidence in Traphaco (TRA)’s ability to re-enter a sustainable growth cycle. Alongside the company's leadership transition, several market and regulatory conditions are turning more favorable for domestic pharmaceutical manufacturers. This update outlines why we believe the timing of these changes is important, and how they support our expectations for TRA.
About Traphaco
Traphaco is one of Vietnam’s largest pharmaceutical manufacturers, best known for its long-established leadership in herbal medicine. Its flagship products such as Boganic (liver health) and Cebraton (neurology support) are household names, produced from domestically sourced herbs and manufactured under modern industrial standards.
Historically, herbal medicine has been the company’s primary cash-generating segment. In recent years, management has also been expanding into modern (Western) medicine, leveraging technology transfer capabilities from Daewoong Pharmaceutical Co., Ltd., its strategic shareholder from South Korea.
Today, TRA operates four manufacturing facilities and maintains the largest distribution network in Vietnam’s pharmaceutical industry, supplying nearly 30,000 pharmacies nationwide. This scale provides an advantage as the market formalizes and competition shifts toward quality and compliance.
In November 2025, TRA appointed a new CEO with nearly 30 years of experience at the company, following her most recent tenure as Director of Marketing and Head of the Western Medicine business. Since the new leadership appointment, we have seen encouraging developments in the company's growth areas, including accelerating brand development, driving product innovation, and expanding premium offerings.
The new CEO's mandate particularly focuses on strengthening TRA's leading position in Eastern herbal medicine while scaling higher-value Western medicine products. As part of this strategy, the company plans to invest in a new Western medicine facility designed to meet European Union Good Manufacturing Practices (EU-GMP).
Achieving EU-GMP standards would be a solid foundation for TRA to raise its competitiveness. Under Vietnam’s regulations, public hospitals procure drugs through a centralized bidding system divided into five groups, in which, the two highest-value groups are reserved for drugs manufactured in EU-GMP-certified facilities or imported from developed markets. These groups typically face less competition and offer higher margins but are currently dominated by foreign suppliers.
Given that the public hospital channel accounts for the majority of drug sales in Vietnam, and that most domestic manufacturers currently only follow the broader, less stringent WHO-GMP standards, EU-GMP certification would allow TRA to gain an immediate advantage and compete in these higher-tier bidding groups for the first time.
Vietnam’s demographic profile is becoming increasingly supportive of pharmaceutical consumption. In 2024, approximately 14% of the population was over 60 years old. By 2050, the elderly population is expected to double, reaching roughly 30 million people. Demand for chronic treatments related to liver health, neurology, and joint care tends to rise with age, aligning with TRA's core product portfolio.
In Vietnam, the healthcare system formally integrates traditional medicine alongside Western medicine. Large public hospitals typically maintain dedicated traditional medicine departments, and herbal medicine is commonly prescribed by fully licensed medical doctors who specialize in traditional medicine. As a result, TRA’s herbal products are registered as medicines rather than supplements, allowing them to be prescribed in hospitals and included in formal treatment regimens.
From a cultural perspective, we see sustained demand for TRA’s herbal line. As it is commonly believed that Eastern products are gentler on the body compared to Western ones, they are often preferred for long-term use. This is why herbal medicines are widely used as part of daily health maintenance, especially among aging people with chronic conditions such as fatty liver, insomnia, or mild neurological symptoms.
Other examples include liver tonics, such as TRA’s Boganic brand, which are particularly popular among middle-aged and older men, as Vietnam has one of the highest per capita alcohol consumption rates in Asia. For younger age groups, brain health supplements also cater to demand stemming from intense professional or academic pressure, such as exam seasons.
At the same time, rising incomes are supporting an expanding middle class with higher healthcare spending. Per capita pharmaceutical consumption has increased steadily, with total market value projected to grow from USD 7.6 billion in 2024 to approximately USD 12 billion by 2030, according to IQVIA Vietnam and BMI Research.
Recent regulatory developments further strengthen the competitive position of domestic manufacturers.
The Amended Law on Pharmacy (effective July 2025) and Circular 40 (October 2025) prioritize domestically manufactured drugs in hospital bidding and procurement. This effectively gives companies like TRA a "home court" advantage over expensive imported products, provided they meet global quality standards such as EU-GMP.
In parallel, stricter enforcement of the Tax Administration Law in 2025 has reduced the prevalence of informal “hand-carried” supplements and medicines sold online by household businesses. For years, these types of products have managed to, through tax evasion, cut prices to unfairly compete against domestic pharmaceutical suppliers like TRA. New tax laws effective from 2026, with requirements for e-invoicing and tax withholding mechanisms on e-commerce platforms, have raised costs for unregistered sellers and therefore improved market fairness for compliant players.
Additionally, a mid-2025 nationwide crackdown on counterfeit supplements damaged trust in lesser-known products, increasingly redirecting consumers to well-established names. Traphaco’s 53-year operating history and “National Brand” status (by Vietnam Value) have allowed the company to capitalize on this shift. TRA re-established its position as the go-to supplier of liver tonics and brain health supplements, leading to a resurgence in sales for its herbal line cash cow.
The Vietnamese government’s objective of achieving double-digit economic growth from 2026, combined with its role as a significant shareholder in state-linked enterprises, creates a supportive backdrop. The State currently holds a 35.7% stake in TRA, aligning incentives toward earnings growth and operational stability.
Management is targeting approximately 10% annual growth in both revenue and profit, supported by stable herbal medicine sales and growing contributions from Western medicine. The EU-GMP upgrade remains a key medium-term catalyst, opening access to higher-tier hospital channels previously dominated by foreign suppliers.
TRA’s current revenue mix is approximately 60% Eastern medicine and 40% Western medicine. Management expects Eastern medicine to deliver mid double-digit growth over the next two years before moderating to single-digit growth over a three-year horizon. On the other hand, Western medicine is expected to grow at around 10% annually over the next three years, constrained by existing capacity.
Overall, insights from the recent meeting with TRA reinforced our view that the company is transitioning from a period of consolidation to a new growth phase. This is particularly supported by improved leadership execution, favorable regulation, and sustainable healthcare demand in Vietnam.