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ACC101 _ Principle of AccountingSUMMER 2023

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

Lecture: To Thi Thuy DuongClass: MC1805

Students Name - ID:Lang Vu Trong Thanh - SS170749

Nguyen Thien Phu - SS170663Nguyen Truc Ha - SS170037Nguyen Vo Hoang Long - SE140908

Nguyễn Thị Hà Ánh - SS170617

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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

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

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1. Abstract:

The steel industry plays a crucial role in the economic development of Vietnam, contributingsignificantly to the country's infrastructure and construction sectors. This report focuses on fourprominent companies operating in the steel industry of Vietnam: Hoa Phat Group (HPG), HoaSen 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 constructionindustry, Hoa Phat has become an industrial production group with the goal "becoming an activeand sustainable leading industrial group". To achieve this goal, the Group will: Focus on corebusinesses and develop value-added products. Expanded distribution network, increasedmarket share, and made the Hoa Phat brand name more popular. Develop technology for thecompany’s sustainable development. For years, Hoa Phat Group always reported outstandingprofit 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, 2001based on Business Registration Certificate No. 4603000028 issued by Binh Duong Departmentof 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 60billion VND. On January 14, 2011, the company's shares were listed and traded on HOSE. Themain 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 finalplating products/year.

2.4 Dai Thien Loc (DTL):

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

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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 goodmanagement of production cost.

II. ANALYSIS OF FINANCIAL RATIOS1. Profitability ratios

1.1 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 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 raisesconcerns about the company's ability to maintain profitability. Further analysis is needed todetermine 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 ableto maintain a decent level of profitability. However, the slight decline to 10% in 2022 maywarrant further investigation to understand the factors impacting profitability.

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NKG had a relatively lower gross profit margin compared to the other companies, ranging from8% to 15% over the three years. The increase in margin from 2020 to 2021 shows someimprovement in profitability. However, the decline to 6% in 2022 raises concerns about NKG'sability to sustain profitability and may indicate potential challenges in cost management orpricing strategy.

● Based on the available gross profit margin figures, HPG appears to have had the highestlevel 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 profitmargins over the three years.

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

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

1.2 Net profit margin:(2020-2022, %)

To assess the financial healthof the four companies (HPG,HSG, NKG, and DTL) basedon their net gross profitmargins, let's consider theavailable information:

HPG had relatively high net gross profit margins in all three years. While there was a decline inthe 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 oninvestment, as well as qualitative factors, to have a comprehensive evaluation of HPG'sfinancial health.

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HSG had lower net gross profit margins compared to HPG. However, there was a consistentimprovement in the margins from 2020 to 2021. The significant decline in the margin in 2022raises concerns about the company's financial health and profitability. Further analysis of otherfinancial 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 companyexperienced positive growth from 2020 to 2021 but faced a negative margin in 2022. Thisindicates potential challenges in maintaining profitability and requires a closer examination ofthe company's financial health.

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

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

● 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 themargin in 2022.

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

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

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

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

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Return on assets ratioand reflects thecorrelation between acompany's profitabilityratio and its assets.Thanks to thedetermination ofROA, investors willknow the efficiency ofusing assets to makeprofits for thebusiness.

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

Specifically, Hoa Phat Group has the highest ROA growth. Considered as a nationalcorporation, this index is lower than that of world steel corporations, but it is still enough tomaintain 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 timecontrolling their net profit, worst in 2022 with ROA= - 6%.

ROE helps business managers know how much equity a company spends in business willgenerate net profit. The higher the ROE, the more efficient the company's capital use processis.

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ROE of at least 15% is one of the criteria to evaluate the company's financial capacity accordingto international standards. This is a very important criterion used by Warren Buffett - a famousinvestor when choosing a business.

Thus, in the last 3 years, ROE of 4 companies has increased and decreased according to thetrend and general market context. In which, Hoa Sen Group (2022) took the top position of HoaPhat in terms of ROE with 38.88%. However, coupled with inflation near 10% (in 2021), ROEhas 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 allhigher 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. Thisshows HSG's substantial financial reserves to ensure payment of debts and maintain stablebusiness operations, able to cope with risks and fluctuations in the business environment. .

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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 tomore Inventories or slow collection of money from customers.

2.2 Quick ratio (Unit: times)

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Quick ratio of 2 companies HPG and DTL tend to grow over the years, showing improvedshort-term solvency. But the quick ratio of HSG and NKG has been volatile over the past 3years. HPG has the highest quick ratio, showing that HPG has better ability to pay short-termdebt and short-term assets compared to other companies on the list, possibly because HPG isthe 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 financialstability of the company. Regarding DTL, although this ratio has increased over the years, it isstill lower than other companies of the same period. This shows that DTL's short-term debtsolvency is worse than other companies.

2.3 Cash ratio: (Unit: times)

In general, cash ratios ofcompanies are volatile.NKG has improved cashpayments over the years.The ability to pay off debtwith cash of companieswith low cash ratio showsthat 4 companies havelittle cash.

In which, HPG has the highest cash ratio, showing a higher ability to convert cash to payshort-term debt than other companies. DTL has the lowest cash ratio, indicating that thecompany 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 andshort-term performance than NKG and DTL. Companies that hold little cash but have highcurrent ratios and are all greater than 1, are likely to hold a lot of Inventories. Having highlyliquid assets, companies are still able to repay current debts.

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

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 19epidemic leading to their debtors are unable to pay their debts on time. However, there is aremarkable increase in 2022 (30.63%) of 3 times compared to last year. This significantincrease shows that the efficiency of receivables management has improved as the companyhas improved its credit management and collection processes, resulting in faster and moreefficient collection of outstanding receivables more effective.

NKG :

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

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

Overall, based on these figures, HSG company stands out with a significant increase in AccountReceivables turnover in 2022, indicating improved efficiency in managing their receivables. HPGand NKG companies also show efficient management of receivables, with some minorfluctuations. DTL company, on the other hand, experienced a decline in Account Receivablesturnover, 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 supplychain disruptions, such as material delivery delays or problems shipping subject. However, thereis an increase in 2022 (3.61), indicating a higher turnover rate than the previous year. This canbe seen as a positive trend, showing more efficient inventory management.

HSG Company:

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HSG's inventory turnover tends to decrease from 2020 to 2021 (4.15 to 3.23) indicating a longerinventory turnover time. However, there is a significant increase in 2022 (6.05), indicating ahigher turnover ratio than the previous year. This shows that the company is managing itsinventory 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 longerinventory turnaround time. There is a slight increase in 2022 (3.08), but still lower than in thefirst year. This suggests that the company may be facing challenges or inefficiencies inmanaging 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 slightincrease from 2020 to 2021 (1.2 to 1.21) and another small increase in 2022 (1.27). Althoughthe inventory turnover rate is low compared to other companies, it shows consistentmanagement of inventory turnover.

Based on these numbers, in about the first 2 years most companies have difficulty in handlingtheir inventory mainly due to the appearance, HSG company stands out with a significantincrease in inventory. on inventory turnover in 2022, showing that their inventory managementefficiency has improved. HPG Company also showed an improvement in 2022 compared to theprevious year. However, NKG company saw a decrease in inventory turnover, indicatingpotential challenges in inventory management. DTL Company maintains a relatively stableinventory turnover rate.

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

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