INTRODUCTION
Company name: Thanh Cong Textile - Investment - Trading Joint Stock Company (TCG)
Telephone: (+84)3815.3962 - (+84)3815.3968 Email: tcm@thanhcong.com.vn
Address: 36 Tay Thanh, Tay Thanh Ward, Tan Phu District, Ho Chi Minh City, Vietnam
Website: https://www.thanhcong.com.vn/
Founded in 1976, Thanh Cong Company has emerged as a leading player in Vietnam's textile and garment industry Originally named Thanh Cong Textile Factory after being taken over by the State, the company operates under the Union of Textile Enterprises within the Ministry of Light Industry Committed to substantial development, Thanh Cong focuses on serving its customers, suppliers, investors, and employees through diligent work and continuous innovation.
1.1 The company’s primary line(s) of business
Thanh Cong offers a diverse range of products, including woven and knitted fabrics, rib, collars, cuffs, chemicals, and dyeing substances, alongside essential supplies and equipment for textile and garment production In addition to manufacturing and exporting these items, the company engages in real estate development projects, such as residential buildings, resorts, and supermarkets With four yarn plants producing a total of 21,000 tons annually and a textile factory with a capacity of 7 million meters per year, Thanh Cong also operates a garment factory capable of producing 18 million goods annually Its products primarily target export markets in the US, Japan, Europe, Korea, and China The company's growth strategy focuses on expanding its core textile and garment industry, enhancing production capacity, and optimizing its closed manufacturing processes while improving product manufacturing, worker productivity, and research and development to meet the evolving demands of consumers.
1.2 The company's independent (external) audit firm
In 2007, Thanh Cong company was officially listed on the Ho Chi Minh City Stock Exchange under the code TCM The company experienced significant growth, nearly tripling its charter capital within the first three years and consistently paying annual dividends ranging from 10% to 15% After being audited by Deloitte in 2018 and 2019, Thanh Cong partnered with PWC for its auditing needs in 2020.
1.3 The company’s board of directors
1 Mr Tran Nhu Tung - Chairman of the board
2 Mr Park Heung Su - Vice chairman of the board
3 Mr Lee Eun Hong - Member of the board
4 Mr Jung Sung Kwan - Member of the board
5 Ms Nguyen Minh Hao - Member of the board
6 Mr Nguyen Van Nghia - Member of the board
7 Mr Kim Il Kyu - Member of the board
8 Mr Kim Jong Gak - Independent member of the board
9 Mr Dinh Tan Tuong - Independent member of the board
10 Ms Huynh Thi Thu Sa - Secretary Of BOD
Through the operation period, Thanh Cong has many famous achievements, ranked in top 500 largest companies in Vietnam and top 500 enterprises with the best growth in Vietnam
2 ANALYSIS OF THE BALANCE SHEET
As of the end of
Total liabilities and stockholders’ equity
As of the end of
Total liabilities and stockholders’ equity
An analysis of the current assets of Thanh Cong and its competitor, Song Hong, reveals that Song Hong consistently outperformed Thanh Cong from 2018 to 2020 Thanh Cong's current assets began at 1,893,146,267,570 VND in 2018, experiencing a slight decline of 2.72% the following year, ultimately reaching 1,783,900,889,021 VND in 2020 In contrast, Song Hong started with a higher figure of 1,869,648,282,341 VND in 2018, showing a steady increase of 1.46% and 0.53% in the subsequent years Overall, Song Hong maintained a stronger position in terms of current assets relative to total assets during this period.
Throughout the analyzed period, Thanh Cong's long-term assets showed a slight increase of 2.72% in 2019, but ultimately faced a significant decline, dropping to 105,821,933,916 VND by the final year In contrast, Song Hong's non-current assets began at 651,328,967 VND in 2018, experienced a notable decrease to 625,290,224,260 VND the following year, and concluded the period with a marginal rise of 1,222,465,827 VND Overall, Thanh Cong outperformed its competitor in terms of asset growth, despite the latter's downward trend.
Between 2018 and 2020, both Thanh Cong and Song Hong exhibited a similar trend in liabilities, with a slight decrease observed over the period Thanh Cong experienced a notable reduction in total liabilities, dropping by 9.45% in 2019 and continuing with a 6.3% decline in 2020 Similarly, Song Hong's liabilities decreased from 62.96% in 2018 to 45.12% in 2020 This reduction in debt and financial leasing liabilities indicates an improvement in Thanh Cong's financial status, effectively mitigating risks amidst unforeseen global changes affecting the clothing industry Despite this progress, Thanh Cong's total liabilities remained lower than those of its competitor.
Thanh Cong's current liabilities are slightly higher than those of Song Hong, but both companies show a trend of decreasing liabilities, indicating an improved ability to meet their debt obligations promptly Notably, Thanh Cong's current liabilities have been on a downward trajectory.
In 2018, the total revenue was 1,701,087,853,546 VND, which dropped to 1,331,355,715,842 VND in 2019, followed by a slight decline of approximately 74 billion VND in the subsequent year Similarly, Song Hong experienced a consistent decrease in revenue, starting from 1,485,759,651,787 VND in 2018 and reaching 1,185,555,218,921 VND by the end of the period.
Both Thanh Cong and Song Hong experienced a steady decline in non-current liabilities over the analyzed period, with both companies maintaining a relatively low proportion of these liabilities Notably, Song Hong successfully eliminated all non-current liabilities in 2020, while Thanh Cong focused on gradually reducing its own, which had been significantly higher in 2018 at 8.31% compared to Song Hong's 4.03% By 2019, Thanh Cong's non-current liabilities decreased to 5.69% and further to 2.71% in 2020, indicating an improved ability to manage debt Conversely, Song Hong, starting from a lower base, reduced its non-current liabilities to 2.37% in 2019 and achieved a remarkable 0% in 2020, thereby maintaining a robust financial structure.
Over a three-year period, both Thanh Cong and Song Hong experienced steady growth in total stockholder's equity, contrasting with their total liabilities Thanh Cong's stockholder's equity increased from 1,276,398,448,284 VND to 1,638,734,940,727 VND, representing 39.31% and 55.06% of total liabilities and equity, respectively Similarly, Song Hong's stockholder's equity rose from 37.04% to 54.88% between 2018 and 2020 Notably, the financial gap between the two companies narrowed significantly, decreasing from 342,675,303,400 VND to 196,534,892,400 VND over the same period.
ANALYSIS OF THE INCOME STATEMENT
Items Code VND % VND % VND %
Gross revenue from goods sold and services rendered
Net revenue from goods sold and services rendered
Cost of goods sold and services rendered
Gross profit from goods sold and services rendered
Net profit after corporate income tax
Items Code VND % VND % VND %
Gross revenue from goods sold and services rendered
Net revenue from goods sold and services rendered
Gross profit from goods sold and services rendered
Net profit after corporate income tax
The following tables describe the variations between Thanh Cong and its competitor, Song Hong, based on the income statements available for 2018, 2019, and 2020
Firstly, a look at the tables indicates that the net revenue from goods sold and services rendered by Song
During the period from 2018 to 2019, Hong slightly outperformed Thanh Cong in terms of currency While the percentage figures for Thanh Cong and its counterpart showed minimal variation, the financial amounts revealed a contrasting trend Despite a slight decline in Thanh Cong's financial performance, Hong managed to maintain a superior position.
(17,810,675,994 VND), Song Hong encompassed a huge upward trend of 460,426,047,851 VND By
2020, either entity continued the decreasing path with the percentage over total sales staying the same for
Thanh Cong and falling by 0.11% for Song Hong
Secondly, for the Cost of goods sold and services rendered of Thanh Cong, there has been a spike by
In 2019, the cost of goods sold and services rendered for Song Hong experienced a slight decrease of 0.97%, while in 2020, it rose by 1.27% This contrasts with the overall trend, which saw a decline of 2.69% in 2019 followed by a further decrease of 1.99% in 2020.
From 2018 to 2020, both Thanh Cong and Song Hong experienced a decline in financial expenses, with Thanh Cong decreasing from 2.44% to 1.70% and then to 1.38% Selling expenses for Thanh Cong remained relatively stable at approximately 143.98 billion VND, while Song Hong saw a significant increase in 2019, followed by a sharp decline in the final year General and administrative expenses diverged, with Thanh Cong showing a downward trend from 6.28% to 4.09%, whereas Song Hong's expenses increased by 4.57% Additionally, both companies had rising other expenses from 2018 to 2019, but Thanh Cong faced a substantial drop of 1.16 billion VND, contrasting with Song Hong's unchanged percentage.
From 2018 to 2020, Thanh Cong demonstrated a consistent increase in net profit growth, rising from 6.78% to 9.80%, while Song Hong experienced a decline of 4% Although Thanh Cong's accounting profit before tax slightly decreased from 8.83% in 2018 to 7.52% in 2019, it rebounded to 9.89% in 2020 due to increased net profit Conversely, Song Hong's accounting profit grew by 1% from 2018 to 2019 but fell to 7.2% in 2020 This contrast highlights how the development of accounting profit can significantly influence net profit after corporate income tax, with Thanh Cong showing a decrease in net profit despite overall growth trends.
In 2019, growth declined by 1.16%, but a rebound is expected in 2020 with an anticipated growth rate of 7.96% Conversely, Song Hong experienced an increase from 9.36% in 2018 to 10.20% in 2019, but saw a notable drop to 6.07% in 2020.
In summary, Song Hong consistently outperformed Thanh Cong in earnings per share, despite experiencing an annual decline Notably, in 2020, Song Hong faced a significant drop to just 4.635 VND, indicating a substantial decrease in the company's value.
The COVID-19 pandemic initially caused a decline in Thanh Cong's earnings per share over the first two years; however, by 2020, their earnings rebounded to 3,775 VND, narrowing the gap with their competitors.
Thanh Cong's profit growth, both before and after tax, can be attributed to a 37.96% year-on-year increase in income from financial activities, coupled with a 22.61% reduction in financial expenses.
In 2020, Thanh Cong enhanced productivity by optimizing the layout and utilization of machinery, resulting in a 14% increase in dyeing production compared to 2019 The company implemented various strategies to lower production costs, including reducing energy expenses and minimizing raw material waste, which significantly improved its annual rate of return.
In 2019, the company signed a Memorandum with Juki Singapore Group, a well-known group in sewing sector to implement a smart factory project to increase productivity
In October 2020, the company enhanced its production capacity, resulting in an approximate 10% increase in product value for its brand Additionally, the company raised its charter capital to VND 620,683,490,000, further strengthening its financial foundation for growth.
RATIO ANALYSIS
Liquidity ratios
The current ratio is used to measure a business's ability to pay its short-term liabilities with its short-term assets, such as cash, accounts receivable, and inventory
The chart demonstrates that both Thanh Cong and its competitor experienced an upward trend in current ratios over three years, with all figures surpassing 1, indicating a strong ability to meet short-term liabilities This increase in liquidity has reduced the investment risk for both companies Specifically, Thanh Cong saw a slight decline in current assets and liabilities, resulting in a modest rise in its current ratio from 1.11 to 1.22 by the end of 2019 In contrast, Song Hong's current ratio increased to 0.27 during the same period By 2020, Thanh Cong's current ratio further rose by 0.20 to reach 1.42, while Song Hong's ratio only grew by 0.16 Overall, the data clearly illustrates the positive trend in liquidity for both companies throughout the period.
3 years from 2018 to 2020, Song Hong's current ratio is higher than Thanh Cong's current ratio, about 0.1 to 0.3 depending on each year
The quick ratio is a key financial metric that assesses a company's ability to meet its short-term liabilities using its most liquid assets This ratio excludes inventory, the least liquid current asset, which can lead to inflated sales figures and misrepresentations of a firm's financial health due to overstocking or overproduction.
The quick ratio analysis reveals that Thanh Cong's figures have consistently lagged behind those of Song Hong over the past three years, although both companies are experiencing an upward trend Thanh Cong's quick ratio has shown a modest increase from 0.44 in 2018 to 0.55, reaching 0.62 in 2020 However, with a ratio below 1, it indicates that Thanh Cong's liquid assets are insufficient to meet its short-term obligations, compounded by signs of excessive inventory In contrast, Song Hong has demonstrated remarkable growth in its quick ratio, soaring from 0.8 in 2018 to an impressive 1.67 in 2020, suggesting that the company is well-equipped to cover its current liabilities and maintain robust liquidity and financial health.
The cash ratio is an indicator of a company's liquidity which measures the ability of the business to pay off current liabilities utilizing the company's total cash and cash equivalents
While Song Hong consistently outperformed Thanh Cong in liquidity ratios over three years, the cash ratio presents a different picture In 2019, Thanh Cong's cash ratio rose to 0.54, surpassing Song Hong's However, in 2020, Thanh Cong's cash ratio fell to 1.15, while Song Hong's significantly increased to 2.29 This indicates that Thanh Cong's short-term repayment capability has fluctuated, contrasting with Song Hong's steady improvement.
19 term debt by cash and nearly cash resources is quite fluctuating while its counterpart efficiently covers the current liabilities with a more liquidity ratio.
Efficient ratio
Days’ sales in inventory (days)
Days’ sales in receivables (days)
Days’ sales in inventory (days)
Days’ sales in receivables (days)
Inventory turnover is a financial indicator that analysts use to determine whether a company's operations are efficient by looking at the times inventory is replaced and sold
Days’ sales in inventory are a financial ratio that shows the average time in days that it takes a company to turn its inventory, including goods being sold, into sales
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 (𝑑𝑎𝑦𝑠) Receivables turnover is an accounting metric used to assess a company's efficiency in collecting receivables and debts from customers
Days’ sales in receivables are calculated as the average number of days it takes a company to collect cash payments after a sale has been made
𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 (𝑑𝑎𝑦𝑠) Total assets turnover is an effective measure in gauging how the enterprise makes use of its assets
The comparison of efficiency ratios between Thanh Cong and Song Hong reveals significant differences in inventory turnover Thanh Cong's inventory turnover is approximately half that of its competitors, indicating less efficiency in asset management The days' sales in inventory for Thanh Cong range from 106.29 to 139.24 days, considerably higher than Song Hong's 69.08 to 76.42 days Over the three-year period, Thanh Cong required 2.62 to 2.83 times to turnover its inventory, while its rivals achieved a turnover rate of 4.78 to 5.28 times.
Nevertheless, the situation goes into reverse when people discuss the receivables turnover ratio Thanh
During a three-year period, Cong demonstrated exceptional efficiency in collecting receivables, achieving an average turnover ratio of 14.85 times, with a notable peak of 17.39 times in 2020 This performance was complemented by a reduction in the average collection period, decreasing from 27.90 days to approximately 20.99 days In contrast, Song Hong faced challenges, reflected in a lower average turnover ratio of 9.30 times over the same period, as the company struggled with contract delays and the bankruptcy of a major client, according to equity research from BSC Securities (2021b).
In 2020, New York & Company experienced a decline in receivables turnover, while both companies exhibited similar trends in total assets turnover However, Song Hong demonstrated a superior capacity to effectively utilize their assets for generating earnings.
Long-term solvency ratios
The total debt ratio takes into account all debts of all creditors to offer the view of a company's debt and how it is financed (Debitoor, 2021)
It is explicitly observed that the total debt ratio of either enterprises had nearly the same ratio In 2018,
In 2019, Thanh Cong's debt ratio decreased from 0.61 to 0.51, while its competitor experienced a decline of 0.11 times Notably, both companies reported identical debt ratios in 2020.
0.45 which implies that Thanh Cong and Song Hong have the same movement in handling their debts
The debt to equity ratio is a crucial financial and liquidity metric that compares a company's total debt to its total equity, indicating the proportion of financing sourced from creditors and investors Notably, both Thanh Cong and Song Hong have demonstrated a consistent decline in their ratios over the years Thanh Cong's ratio decreased from 1.54 to 1.05 in 2019, while Song Hong's ratio fell from 1.70 in 2018 to 1.08 the following year By 2020, both companies further reduced their ratios to 0.82, reflecting their efforts to lower leverage and make less risky choices for investors.
The equity multiplier serves as a key risk indicator, reflecting the extent to which a company's assets are financed by stockholder equity instead of debt An analysis reveals that Song Hong has slightly outperformed its competitor, with both companies experiencing a downward trend over the observed period In 2019, the equity multiplier ratios for Thanh Cong and Song Hong were nearly identical at 2.05 and 2.08, respectively, but concluded the final year with a reduced ratio of 1.82 times.
Looking at the pattern, either entity was putting efforts into getting rid of debt reliance by financing by stockholder’s equity instead
The time interest earned ratio is a key indicator of a company's ability to fulfill its interest obligations based on current income From 2018 to 2019, Thanh Cong experienced a decrease in its ratio from 6.23 to 5.55, while its competitor, Song Hong, saw a significant increase from 13.33 to 24.23 However, in 2020, the trend reversed, with Thanh Cong's ratio rising to 12.37 and Song Hong's falling to 18.66 This indicates that Thanh Cong successfully improved its ability to cover financing interest charges over the three years, despite the initial downward trend compared to Song Hong Nevertheless, Song Hong maintained a stronger overall time interest ratio throughout the period.
Cash coverage ratio measures the liquidity of the firm and considers only the cash or cash equivalents
(Ratiosys) The table illustrates apparently that Song Hong was completely superior to Thanh Cong throughout the course From 2018 to 2019, Song Hong has an epic rocket growth of 16.79 to 29.46 times
(12,67 times) while Thanh Cong has shown no sign of evolving in a year with only 0.14 times rise
In the past year, the dynamics between the two companies shifted notably, with Song Hong's ratio experiencing a decline from 29.46 to 27.34 Meanwhile, Thanh's performance saw a corresponding improvement.
Cong remarkably uplifted to 16.67 times Overall, it can be observed that Thanh Cong initially remained constant but then effortly managed to fulfill its current debt.
Profitability ratios
Profitability ratios measure either how efficiently a company makes use of its assets or how efficiently the business controls its operations
4.4.1 Profit margin:For every dollar of sales, profit margin gauges how much a firm generates profit in net income
The data indicates that both companies encounter profit fluctuations for every dollar of sales over a three-year period Specifically, Thanh Cong observed a minor decline in its profitability during this time.
In 2019, Thanh Cong's profit margin was 1.16%, but it surged to 7.96% in 2020, demonstrating effective management during the pandemic, aided by their own garment resources and a significant order of $15 billion in Q2 2020, as reported by BSC Securities (2021) In contrast, Song Hong started with a higher profit margin of 9.36% in 2018 but experienced a decline, ending at 4.12% in 2020, reflecting the adverse effects of COVID-19 The comparison highlights Thanh Cong's resilience and operational efficiency amid challenging circumstances.
Cong throughout the time which leads to the better generating profit for each dollar of sales
Return on assets (ROA) is an indicator of how profitable the company is in relation to its assets management The equation of ROA is:
A look at a chart revealed that Thanh Cong obviously was inferior regarding the ROA of Song Hong firm
Since 2018, Thanh Cong reported a return on assets (ROA) of 8.02%, experiencing a slight decline in 2019 before rebounding to 1.86% the following year In contrast, Song Hong started with a high ROA but remained stagnant until it reached 17.53% in the subsequent year, marking a 2.86% increase However, after this peak in asset utilization efficiency, the company's profitability saw a significant decline.
8,82%, even lower than its competitor This specifies the fact that either business overcame an oscillation concerning the earnings achieved by utilizing assets
Return on Assets (ROA) measures a company's profitability in relation to its net income and total assets, while Return on Equity (ROE) assesses financial performance by examining net income against shareholders' equity.
Song Hong has demonstrated a strong ability to generate profits from its assets, achieving a significant return on equity (ROE) of 39.61% in 2018, nearly double that of its competitor, Thanh Cong, which experienced a fluctuation of around 5% over three years Despite a slight decline of 5.19% in 2019, Thanh Cong rebounded to 16.86% by the end of the year The impressive performance of Song Hong attracted investors and benefited its stockholders; however, the company has since faced a notable decline in ROE, raising concerns about its future profitability.
16,07% in 2019 (declined totally 23,54%), even lower than Thanh Cong.
Market value ratios
Earnings per share is a ratio that reflects the company’s profitability The higher the company’s earnings per share, the more profitable it is (Fernado, 2021)
This ratio is calculated as the company’s net income or profits divided by the outstanding shares in the market
The net income for Thanh Cong company, derived from the previously analyzed income statement, showed minimal fluctuations in earnings per share from 2018 to 2020.
The earnings of this company decreased more than 1000 VND per share in 2019 but then recovered in
2020 In the meantime, the figure of Song Hong was not stable In the first two years, 2018 and 2019
Song Hong company prevailed over Thanh Cong company However, at the end of the period, the year
2020 the situation went back to its balanced position To clarify, in 2018, Thanh Cong firm had earnings per share starting at 4,811.33 VND This company also witnessed a slight decrease in 2019 (3,744.14
VND) before continuing to be on the right track in 2020 (4,457.60 VND) About its competitor, Song
Hong company had a higher starting point at 7,764.89 VND A year after this trend remained peaking at
In 2019, Thanh Cong reported earnings per share of 8,995.22, but this figure halved in 2020 Despite ending the period with lower earnings per share compared to Song Hong, Thanh Cong demonstrated significant development, especially as its competitors faced numerous challenges.
The price-to-equity ratio measures the amount of money the investors are willing to pay for that stock
From 2018 to 2019, Thanh Cong and Song Hong exhibited contrasting trends in their earnings ratios In 2018, Thanh Cong's shares were valued at 3.64 times earnings, which rose to 4.17 times in 2019, while Song Hong experienced a decline from 5.28 to 4.29 times However, both companies saw significant growth in 2020, with Song Hong doubling its previous year's earnings ratio.
8.57 times It was more surprising that this ratio of Thanh Cong company steadily rose and surpassed its competitors peaking at 10.16 at the end of 2020 It was indicated that the quantity of investors who started to pay attention to Thanh Cong company rapidly increased in the year
The market-to-book ratio is a key financial metric that compares a company's market value to its book value A ratio below 1 indicates that the company's stock is undervalued, suggesting poor performance and making it a less attractive investment (Kelton, 2021) Conversely, a market-to-book ratio above 1 reflects strong company performance, encouraging investors to consider purchasing the stock.
The situation was not very good for Thanh Cong company at the beginning of the period, in two years
Between 2018 and 2019, both Thanh Cong and Song Hong companies faced undervaluation, with Thanh Cong's market-to-book ratio dropping from 0.74 to 0.63, while Song Hong's ratio decreased from 2.09 to 1.79 However, in 2020, Thanh Cong diverged from this downward trend, achieving a remarkable rise in its ratio to 1.71, while Song Hong continued to decline, reaching a low of 1.38 Ultimately, Thanh Cong's impressive growth trajectory highlights its potential for future success, as it surpassed its competitor despite initial undervaluation.
CONCLUSION
Thanh Cong demonstrates steady financial growth compared to its competitors, particularly Song Hong, which has experienced negative fluctuations in its ratios This positions Thanh Cong favorably for future market share expansion, leveraging its consistent performance Despite facing challenges such as the Covid-19 pandemic since 2018, the company has seen a progressive improvement in earnings Additionally, Thanh Cong has maintained stable efficiency ratios in collecting receivables and managing customer debts, further solidifying its strong financial standing.
Thanh Cong demonstrates a strong capacity to manage financial leverage, outpacing competitors through its partnership with Juki Singapore Group This collaboration enhances production capacity and boosts productivity by utilizing Juki's software for operational analysis, which eliminates redundant processes and accelerates product finishing on the sewing line.
Thanh Cong's ROE and market value ratios over the past three years suggest that, while its operational efficiency may be perceived as lower, the company is anticipated to achieve greater growth and profitability compared to its competitors Additionally, Thanh Cong has shown remarkable stability in its operations, even amid the challenges posed by the Covid-19 pandemic.