viet nam steel manufacturers financial ratio analysis 2020 2022

Profitability ratios1.1 Gross profit margin 2020-2022, %Assessment of the four companies HPG, HSG, NKG, and DTL based on their gross profitmargins over the three-year period:HPG had a re

ACC101 _ Principle of Accounting

SUMMER 2023

VIET NAM STEEL MANUFACTURERS' FINANCIAL RATIO ANALYSIS (2020-2022)

Lecture: To Thi Thuy Duong Class: MC1805

Students Name - ID:

Lang Vu Trong Thanh - SS170749

Nguyen Thien Phu - SS170663 Nguyen Truc Ha - SS170037 Nguyen Vo Hoang Long - SE140908

Nguyễn Thị Hà Ánh - SS170617

I INTRODUCTION 3

1 Abstract: 3

2 Introduction: 3

2.1 Hoa Phat Group (HPG) 3

2.2 Hoa Sen Group (HSG) 3

2.3 Nam Kim Group (NKG) 3

2.4 Dai Thien Loc (DTL) 3

II ANALYSIS OF FINANCIAL RATIOS 4

1 Profitability ratios 4

1.1 Gross profit margin 4

1.2 Net profit margin 5

1.3 Return on Asset 7

1.4 Return on Equity 8

2 Liquidity ratios 8

2.1 Current ratio: 8

2.2 Quick ratio: 9

2.3 Cash ratio: 10

3 Efficiency ratios 11

3.1 Accounts Receivable Turnover Ratio: 11

3.2 Inventory Turnover Ratio: 12

3.3 Days of sales in inventory 14

3.4 Day sales uncollected: 15

3.5 Total asset turnover: 16

4 Leverage ratios 18

III RECOMMENDATION: 19

IV CONCLUSION 20

V REFERENCE: 20

1 Abstract:

The steel industry plays a crucial role in the economic development of Vietnam, contributing significantly to the country's infrastructure and construction sectors This report focuses on four prominent companies operating in the steel industry of Vietnam: Hoa Phat Group (HPG), Hoa Sen Group (HSG), Nam Kim Group (NKG), and Dai Thien Loc (DTL)

2 Introduction:

2.1 Hoa Phat Group (HPG):

Starting business in 1992 and mainly supplying equipment and spare parts for construction industry, Hoa Phat has become an industrial production group with the goal "becoming an active and sustainable leading industrial group" To achieve this goal, the Group will: Focus on core businesses and develop value-added products Expanded distribution network, increased market share, and made the Hoa Phat brand name more popular Develop technology for the company’s sustainable development For years, Hoa Phat Group always reported outstanding profit and growth in most business sectors

2.2 Hoa Sen Group (HSG):

Hoa Sen JSC, the forerunner of Hoa Sen Group JSC, was established on August 8th, 2001 based on Business Registration Certificate No 4603000028 issued by Binh Duong Department

of Planning and Investment with the initial charter capital of VND30 billion At the end of 2003, the Group owned 34 branches

2.3 Nam Kim Group (NKG):

Nam Kim Steel Joint Stock Company was established in 2002 with an initial charter capital of 60 billion VND On January 14, 2011, the company's shares were listed and traded on HOSE The main business areas of the enterprise include Producing all kinds of color coated steel sheets, galvanized steel sheets, steel pipes, steel coils; Buying and selling all kinds of iron and steel NKG currently manages and operates 04 factories with a total capacity of 1 million tons of final plating products/year

2.4 Dai Thien Loc (DTL):

Dai Thien Loc Corporation was previously known as Dai Thien Loc Steel Co., Ltd, which was established in 2001 It was equitized in Ap 2007 and officially came into operation as a joint stock company in Jun 2007 Dai Thien Loc Corporation mainly specializes in producing galvanized steel and prepainted steel The company’s products have high competitiveness and

can penetrate into foreign markets such as: Middle East countries, Bangladesh,Pakistan, Laos, Cambodia… Dai Thien Loc Corporation is considered to have a good reputation and good management of production cost

II ANALYSIS OF FINANCIAL RATIOS

1 Profitability ratios

1.1 Gross profit margin (2020-2022, %)

Assessment of the four companies (HPG, HSG, NKG, and DTL) based on their gross profit margins over the three-year period:

HPG:

HPG had a relatively high gross profit margin in 2020 and 2021 (21% and 27%, respectively), indicating a healthy level of profitability However, the significant decline to 12% in 2022 raises concerns about the company's ability to maintain profitability Further analysis is needed to determine the reasons behind this decline and assess the overall financial health of HPG HSG:

HSG had a stable gross profit margin over the three-year period, ranging from 17% to 18% While the margins are not as high as HPG's, the consistency suggests that HSG has been able

to maintain a decent level of profitability However, the slight decline to 10% in 2022 may warrant further investigation to understand the factors impacting profitability

NKG had a relatively lower gross profit margin compared to the other companies, ranging from 8% to 15% over the three years The increase in margin from 2020 to 2021 shows some improvement in profitability However, the decline to 6% in 2022 raises concerns about NKG's ability to sustain profitability and may indicate potential challenges in cost management or pricing strategy

● Based on the available gross profit margin figures, HPG appears to have had the highest level of profitability among the four companies in the earlier years, but faced a decline in 2022

● HSG maintained a relatively stable level of profitability, with consistent gross profit margins over the three years

● NKG had a lower level of profitability compared to the others, with the lowest gross profit margins and a declining trend

● DTL also maintained a moderate level of profitability, with consistent gross profit margins but a significant decline in 2022

1.2 Net profit margin:

(2020-2022, %)

To assess the financial health

of the four companies (HPG,

HSG, NKG, and DTL) based

on their net gross profit

margins, let's consider the

available information:

HPG:

HPG had relatively high net gross profit margins in all three years While there was a decline in the margin from 2021 to 2022, the company maintained a generally healthy level of profitability However, it is important to consider other financial ratios, such as net profit margin and return on investment, as well as qualitative factors, to have a comprehensive evaluation of HPG's financial health

HSG had lower net gross profit margins compared to HPG However, there was a consistent improvement in the margins from 2020 to 2021 The significant decline in the margin in 2022 raises concerns about the company's financial health and profitability Further analysis of other financial indicators and qualitative factors is necessary for a comprehensive assessment NKG:

NKG had lower net gross profit margins compared to both HPG and HSG The company experienced positive growth from 2020 to 2021 but faced a negative margin in 2022 This indicates potential challenges in maintaining profitability and requires a closer examination of the company's financial health

DTL:

DTL had the lowest net gross profit margins among the four companies Moreover, the significant decline to a negative margin in 2022 raises serious concerns about the company's financial health

Overall, HPG had the highest net gross profit margins, indicating a relatively stronger level of profitability

● HPG consistently had the highest net gross profit margins among the four companies, indicating stronger overall profitability in the earlier years However, there was a decline in the margin in 2022

● HSG had lower net gross profit margins compared to HPG, but showed a consistent improvement over the three-year period However, the significant decline in the margin in 2022 raises concerns about the company's financial health and profitability

● NKG had lower net gross profit margins compared to HPG and HSG The company experienced positive growth from 2020 to 2021 but faced a negative margin in 2022, indicating potential challenges in maintaining profitability

● DTL had the lowest net gross profit margins among the four companies Moreover, there was a significant decline to a negative margin in 2022, raising serious concerns about the company's financial health

● Overall, HPG had the highest net gross profit margins, indicating a relatively stronger level of profitability

Return on assets ratio and reflects the correlation between a company's profitability ratio and its assets Thanks to the determination of ROA, investors will know the efficiency of using assets to make profits for the business

In general, ROA of all 4 leading steel companies in Vietnam will fluctuate in 2020-2022 2021 is the year they have the highest index, falling at about 3-19% There is a clear distribution among companies It also shows the difference in profitability of senior companies and companies at the starting line

Specifically, Hoa Phat Group has the highest ROA growth Considered as a national corporation, this index is lower than that of world steel corporations, but it is still enough to maintain HPG's position in the hearts of investors

Dai Thien Loc, a small-cap and late-started steel company, seems to be having a hard time controlling their net profit, worst in 2022 with ROA= - 6%

1.4ReturnonEquity(%)

ROE helps business managers know how much equity a company spends in business will generate net profit The higher the ROE, the more efficient the company's capital use process is

ROE of at least 15% is one of the criteria to evaluate the company's financial capacity according

to international standards This is a very important criterion used by Warren Buffett - a famous investor when choosing a business

Thus, in the last 3 years, ROE of 4 companies has increased and decreased according to the trend and general market context In which, Hoa Sen Group (2022) took the top position of Hoa Phat in terms of ROE with 38.88% However, coupled with inflation near 10% (in 2021), ROE has not really shown the profitability of total equity of steel companies in Vietnam

2 Liquidity ratios (Unit: Times)

2.1 Current ratio (Unit: Times)

In general, the current ratio of companies has increased over the years And the ratios are all higher than 1, showing that the current debt repayment ability of companies is high In which, HSG has the highest and steady growth rate with an average rate of about 30% per year This shows HSG's substantial financial reserves to ensure payment of debts and maintain stable business operations, able to cope with risks and fluctuations in the business environment

Besides, in 2022 DTL has a decrease in current ratio equivalent to a decrease in debt solvency The reason may be due to short-term decrease in revenue such as decrease in sales leading to more Inventories or slow collection of money from customers

2.2 Quick ratio (Unit: times)

Quick ratio of 2 companies HPG and DTL tend to grow over the years, showing improved short-term solvency But the quick ratio of HSG and NKG has been volatile over the past 3 years HPG has the highest quick ratio, showing that HPG has better ability to pay short-term debt and short-term assets compared to other companies on the list, possibly because HPG is the leader in the steel and industrial markets The company has a good financial strategy, investing in short-term investments with high liquidity

Unstable fluctuations in Quick ratio of HSG and NKG This could indicate the uneven financial stability of the company Regarding DTL, although this ratio has increased over the years, it is still lower than other companies of the same period This shows that DTL's short-term debt solvency is worse than other companies

2.3 Cash ratio: (Unit: times)

In general, cash ratios of

companies are volatile

NKG has improved cash

payments over the years

The ability to pay off debt

with cash of companies

with low cash ratio shows

that 4 companies have

little cash

In which, HPG has the highest cash ratio, showing a higher ability to convert cash to pay short-term debt than other companies DTL has the lowest cash ratio, indicating that the company has poor cash accumulation and is at risk of difficulty in paying short-term debt

⇨ General assessment: Out of the four companies, HPG and HSG have better liquidity and short-term performance than NKG and DTL Companies that hold little cash but have high current ratios and are all greater than 1, are likely to hold a lot of Inventories Having highly liquid assets, companies are still able to repay current debts

3.1 Accounts Receivable Turnover

Ratio (Unit: times)

HPG:

Receivables turnover of HPG

company shows that they do very

well in 2 years 2020-2021

(14.02%,17.67%) which indicates

that a company is efficient in

collecting receivables, outstanding

debt, this is positive However, there

is a decline in 2022 (13.11), their Accounts Receivable Turnover policy seems outdated Despite the decrease, the turnover rate is still relatively high, showing the efficiency of receivables management in general

HSG:

The receivables turnover of HSG has decreased in the mid-term period from 12.46% to 10.33%, which is highly likely due to the difficulty of the construction industry in the face of the covid 19 epidemic leading to their debtors are unable to pay their debts on time However, there is a remarkable increase in 2022 (30.63%) of 3 times compared to last year This significant increase shows that the efficiency of receivables management has improved as the company has improved its credit management and collection processes, resulting in faster and more efficient collection of outstanding receivables more effective

NKG :

NKG's receivables turnover shows that they are one of the few companies with a 3-year increase in a row (8.02% to 15.19%), showing a faster receivables turnover than they always have Proactive collection efforts and improved efficiency and accuracy of invoicing and payment procedures can help customers pay faster, positively impacting revenue rates -DTL:

DTL's receivables turnover tends to decrease from 2020 to 2021 (9.62 to 8.12), indicating that the receivables turnover will be longer However there is a sharp decline in 2022 (3.31), even longer than the previous year This drop shows that they are having loopholes and mistakes in their Accounts Receivable Turnover policy

Overall, based on these figures, HSG company stands out with a significant increase in Account Receivables turnover in 2022, indicating improved efficiency in managing their receivables HPG and NKG companies also show efficient management of receivables, with some minor fluctuations DTL company, on the other hand, experienced a decline in Account Receivables turnover, indicating potential challenges or inefficiencies

3.2 Inventory Turnover Ratio: (Unit: times)

HPG Company:

HPG's inventory turnover decreased slightly from 2020 to 2021 (2.71 to 2.58), Caused by supply chain disruptions, such as material delivery delays or problems shipping subject However, there

is an increase in 2022 (3.61), indicating a higher turnover rate than the previous year This can

be seen as a positive trend, showing more efficient inventory management

HSG Company:

HSG's inventory turnover tends to decrease from 2020 to 2021 (4.15 to 3.23) indicating a longer inventory turnover time However, there is a significant increase in 2022 (6.05), indicating a higher turnover ratio than the previous year This shows that the company is managing its inventory effectively and fast sell products quickly

NK Company:

NKG's inventory turnover shows a decline from 2020 to 2021 (4.51 to 2.89), indicating a longer inventory turnaround time There is a slight increase in 2022 (3.08), but still lower than in the first year This suggests that the company may be facing challenges or inefficiencies in managing its inventory turnover after the covid-19 pandemic

DL company:

DTL's inventory turnover is relatively stable over the years, with little fluctuation There is a slight increase from 2020 to 2021 (1.2 to 1.21) and another small increase in 2022 (1.27) Although the inventory turnover rate is low compared to other companies, it shows consistent management of inventory turnover

Based on these numbers, in about the first 2 years most companies have difficulty in handling their inventory mainly due to the appearance, HSG company stands out with a significant increase in inventory on inventory turnover in 2022, showing that their inventory management efficiency has improved HPG Company also showed an improvement in 2022 compared to the previous year However, NKG company saw a decrease in inventory turnover, indicating potential challenges in inventory management DTL Company maintains a relatively stable inventory turnover rate

Overall, the trend in the inventory turnover ratio shows some fluctuations In 2020, the ratio was relatively stable, but it decreased in 2021 before experiencing a notable increase in 2022 The increase in 2022 indicates that the company was able to sell its inventory more quickly, potentially resulting in better cash flow and reduced carrying costs