Analysis of vinamilks financial ratios compared to rival companies habeco and vinacafe

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATIONAL PROGRAMS REPORT FINANCIAL BUSINESS Group Advanced Accounting 60 Nguyen An Binh Nguyen Ngoc Huyen Nguyen Thi Khanh Linh Nguyen Thu Phuong Hoang Le Trang Hoang Khanh Van Ha Noi - 2021 TIEU LUAN MOI download : skknchat123@gmail.com Table of Contents INTRODUCTION I Overview Vinamilk Product Line Market Share 4 Development Orientation Financial Reports Rival companies II i Hanoi Beer - Alcohol - Beverage Joint Stock Corporation (HABECO) ii Vinacafe Bien Hoa Joint Stock Company (VCF) 12 Analysis of Vinamilk operations 16 Analysis of Balance Sheet 16 Analysis of Cash Flow Statement 18 Analysis of Income Statement 19 Analysis of Vinamilk's financial ratios compared to rival companies Habeco and BI Vinacafe 21 Liquidity Ratios 21 i Current Ratio (= Current Assets / Current Liabilities) 22 ii Quick Ratio (= (Current Assets - Inventory) / Current Liabilities) 23 iii Cash Ratio (= Cash / Current Liabilities) 24 Leverage Ratio 25 i Total Debt to Total Assets Ratio (= Total Liabilities / Total Assets) 25 ii Total Debt to Total Equity Ratio (= Total Debt / Total Equity) 26 Efficiency Ratio 27 i Profit ratio from business activities 28 ii ROA coefficient 28 TIEU LUAN MOI download : skknchat123@gmail.com iii ROE coefficient 28 iv Ratio of the ability to pay interest on EBIT / interest 29 Market price indexes 30 IV i Price to Earning Ratio (P/E) 30 ii Price to Book Ratio (P/B) 31 Conclusion 32 TIEU LUAN MOI download : skknchat123@gmail.com INTRODUCTION Financial analysis is used to review economic conditions, to develop financial policies, to develop long-term corporate activities strategies and to recognize investment ventures or businesses The processing of financial figures and statistics is used for this A financial analyst will analyze the financial statements of a company thoroughly, including the statement of income, balance sheet and cash flow In both business finance and investment finance, financial reporting will be carried out One of the most popular methods of analyzing financial data is to measure data ratios and equate those of other firms and the past performance of a firm By applying these methods on this report, Group aims to discuss about financial position and financial performances of Vietnam Diary Joint Stock Company – Vinamilk in the three-year period, staring from 2017 and make comparisons with Hanoi Beer - Alcohol Beverage Joint Stock Corporation – HABECO and Vinacafe Bien Hoa Joint Stock Company – VCF in term of ratios (discussed below) for the same timeframe TIEU LUAN MOI download : skknchat123@gmail.com I Overview Vinamilk Vinamilk Dairy Company, established in 1976, was one of the first listed companies on the stock exchange of Vietnam After more than 40 years of consumer launch, up to now, the company has had branches of sales offices, logistics factories, 14 factories stretching from North to South, and 220,000 points of sale covering all 63 provinces nationwide In 2018, Vinamilk is one of the top 200 companies with the best over a billion-dollar revenue in Asia Pacific Nowadays, Vinamilk is still the most favored milk brand used by consumers in Vietnam with revenue in 2019 reaching 56,300 billion VND (equivalent to more than billion USD) In early 2020, thanks to the strict conditions of complying with the Covid 19 epidemic prevention regulations, the solidity of resources and appropriate strategic adjustments, Vinamilk has been able to stand firmly in the domestic market during a turbulent period because of Covid 19 Product Line Vinamilk provides the market with a wide range of products for consumers The company currently has over 250 dairy products with key product groups such as liquid milk, yogurt, and powdered milk; products with added value like condensed milk, cream and cheese, soy milk, fruit juices, and so on Market Share After years of operation, Vinamilk not only maintains its leading role in the domestic market but also competes effectively against foreign dairy brands In general, Vinamik accounts for over 50% of the domestic market share depending on the type of product Over 90% of Vinamilk's export turnover is from the Middle East, especially Iraq To reduce risk, Vinamilk is expanding its market to other markets like Australia, the USA, Canada, and Thailand In addition, VNM is trying to penetrate the coffee and beer market Development Orientation The Company's main goal is to maximize share value and pursue a business development strategy based on the following key factors: Consolidate, build, and develop a system of powerful brands to best meet the needs and consumer sentiment of Vietnamese people TIEU LUAN MOI download : skknchat123@gmail.com Make Vinamilk brand the most trusted nutrition brand nationwide through the strategy of applying scientific research on consumers' specific nutritional needs to develop the most optimal product lines Strengthen the distribution system and quality to gain more share in markets where Vinamilk's one is not high, especially in rural and small urban areas Comprehensively develop the portfolio of dairy and dairy products to target a large number of consumers, and at the same time, expand the manufacture of high value products with high selling prices to improve overall profit margin of the whole Company Continue to improve supply system management capacity Develop organic milk materials in Moc Chau and expand market share in the North by raising its ownership in GTN to 75%, Vinamilk and increasing the total herd of cows to 155,000 Until 2021, continue to M & A with dairy companies in other countries to expand market share and sales Financial Reports Balance Sheet (VNM) Short-term assets Cash and cash equivalents Short-term investments Short-term receivables Inventory Other current assets Long-term assets Fixed assets Investment properties Long-term investments Other long-term assets Total assets Liabilities Short-term liabilities Long-term liabilities Owner’s equity Owner's invested capital TIEU LUAN MOI download : skknchat123@gmail.com Undistributed profit after tax Liabilities & Owner’s equity Income statement (VNM) Unit: 1,000,000 VND Net Sales Cost of goods sold Gross Profits Financial Income Operating expenses Interest expenses Selling expenses Administration expenses Operating Profits Other income Other expenses Net others income Losses Total profit before tax Current income tax Deferred income tax Profit after tax Indirect Cash Flow Statement (VNM) Unit: 1,000,000 VND 2017 2018 2019 12,228,945 12,051,696 12,795,710 I Cash flows from operating activities Profit before tax Adjustments for Depreciation and amortization TIEU LUAN MOI download : skknchat123@gmail.com (Profits)/losses from allowance and provisions Unrealized foreign exchange (gains)/losses (Profits)/losses from investing activities Interest expense Gain/Losses on disposals of fixed assets Dividends and interest income Goodwill Others Operating profit before changes in working capital (Increase)/decrease in receivables (Increase)/decrease in inventories (Increase)/(decrease) in payables (excluding Interest expense payable, Income tax payable) (Increase)/decrease in prepayments (Increase)/decrease in trading securities Interest paid Income tax paid Other receipts from operating activities Other payments for operating activities Net cash flows from operating activities II Cash flows from investing activities Payments for additions to fixed assets and other long-term assets Proceeds from disposals of fixed assets Payments for lending loans, purchase of debt instruments of other entities Proceeds from collecting loans, sales of debt instruments of other entities Payments for investments in other entities Collections on investments in other entities Receipts of interests and dividends Increase/decrease in term bank deposits TIEU LUAN MOI download : skknchat123@gmail.com Buy-back of capital contributions from minority shareholders in the subsidiary Other receipts from investing activities Other payments for investing activities Net cash flows from investing activities III Cash flows from financing activities Proceeds from shares issued, receipt of capital contribution Payments for shares returns and repurchases Proceeds from short-term and long-term borrowings Payments to settle loan principals Payments to settle finance lease liabilities Payments of dividends Other receipts from financing activities Other payments for financing activities Net cash flows from financing activities Net cash flows during the period Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations Cash and cash equivalents at the end of the period Rival companies i Hanoi Beer - Alcohol - Beverage Joint Stock Corporation (HABECO) Hanoi Beer-Alcohol-Beverage Joint Stock Corporation (HABECO) is the third largest beer company in Vietnam and is the owner of the Hanoi Beer and Truc Bach Beer brands It is owned and authorized by the Ministry of Industry and Trade, Vietnam and has a strategic partnership with the Carlsberg Group, which owns more than 10% of the company's shares as of November 2012 The main operating lines of the Corporation include: Manufacturing and trading Beer - Wine - Beverage and Packaging; Import and export of raw materials, materials, equipment, spare parts, raw materials, chemicals; Science and technology services, investment consulting, creating investment capital, organizing raw material areas, trading real estate, other services, and professions according to the law TIEU LUAN MOI download : skknchat123@gmail.com Beer and bottled water products include: Hanoi only beer cans Truc Bach canned beer Hanoi beer bottles Hanoi green beer Hanoi canned beer Hanoi green beer cans Hanoi Premium Beer Hanoi Bold & Light bottled beer UniAqua bottled water Hanoi Premium canned beer Truc Bach Beer Balance Sheet (BHN) Short-term assets Cash and cash equivalents Short-term investments Short-term receivables Inventory Other current assets Long-term assets Fixed assets Investment properties Long-term investments Total assets Liabilities Short-term liabilities Long-term liabilities Owner’s equity Owner's invested capital Capital surplus Undistributed profit after tax 2019 was understood as a move to prepare to conduct major investment projects in 2020, creating prospects for strong and sustainable growth firm in the following years for the company Analysis of Income Statement Table of Revenue - Expenses Total revenues Revenue from operating activities / Total revenues Financial income / Total revenues COGS / Net sales Total expenses COGS / Total expenses Selling and general administration expenses / Total expenses Financial expenses / Total expenses Table of Revenue Growth, Cost of Goods Sold Net sales COGS Total net profits before tax Profit after enterprise 17 TIEU LUAN MOI download : skknchat123@gmail.com income tax Net sales in 2019 was 56,318 billion VND, up 4% compared to 2018 However, net sales fluctuated when it increased to 9% in 2017, decreased sharply to only 3% in 2018 and then went up to 7% in 2019 Compared to rival companies, Vinamilk's net sales were much higher when all indexes were greater than 3% This was a Vinamilk's positive sign as Vinamilk's revenue growth was still quite good Vinamilk's net sales accounted for the majority of total revenues (98.4-98.6%) This means that Vinamilk mainly focused on its core business and generated real profits from core business, not investing much outside the industry to make profits In addition, in 2019, Vinamilk's total revenue was more than 57,000 billion VND (about 5-20 times higher than rival companies), proving that Vinamilk had a high level of revenue in the industry Along with the growth of revenue is the growth in company profits In 2017, Vinamilk's pre-tax profit increased to 9%, reaching more than 12 billion VND In 2018, the company is showing signs of loss when the profit margin is -1% But then, Vinamilk's pre-tax profit in 2019 jumped to 6% (equivalent to more than 700 million VND) The growth rate of profit over the years 2017-2019 is 14%, the average annual profit growth is 4.6% Profits mainly from operating activities is a good sign that the correct operation of the main operating line and main operating profit results are always good Vinamilk's cost of goods sold accounts for the largest proportion in the total expenses of the enterprise Therefore, an increase in the cost of goods sold reduced the company's profit in the period As can be seen, the ratio of Cost of goods sold / net sales increased to 53.2% in 2018 and then decreased to 52.8% in 2019 This means that in 2019, company had a higher profit compared to last year 2018 had been a difficult year for VNM, but it was improved in 2019 as the company's profits increased Comment: Vinamilk's revenue and operating profits grew at a not too high rate over the years 2017-2019 but still very high and stable compared to other companies in the same industry as well as listed companies on the Vietnamese stock exchange Revenue and profit mainly come from the company's core business and not from out-of-industry investment or unusual activities during the year Since then, it shows that Vinamilk is in a period of relatively stable growth and tends to last when there is a lot of investment and development continuously With the current business results, investment profit in the company is not too high, but positive, stable, 18 TIEU LUAN MOI download : skknchat123@gmail.com and low risk That is evidenced by the continuous increase in Vinamilk's stock price over the years and among the highest in the market Analysis of Vinamilk's financial ratios compared to rival companies Habeco and Vinacafe BI Liquidity Ratios Current Ratio Quick Ratio Cash Ratio i Current Ratio (= Current Assets / Current Liabilities) 19 TIEU LUAN MOI download : skknchat123@gmail.com The current ratio represents the firm's ability to secure short-term liabilities from short-term assets In general, during the analysis period from 2017 to 2019, the current ratios of companies all exceeded 1.0 VNM's coefficient tended to decrease gradually year by year, from 1.99 times (2017) to 1.71 times (2019) However, these coefficients were still kept at a fairly high number, nearly 2.0 times In contrast to VNM, two competitors, BHN and VCF, had their ratio increased The ratio of BHN significantly increased from 1.18 times in 2017 to 1.80 times in 2019 However, it was VCF that outperformed when its ratio in 2019 (2.12) doubled that in 2017 (1.01) In 2019, VNM’s both rivalries had higher coefficients than VNM had which was 1.71 times Although VNM had a noticeable decline in the years 2017 - 2019, but overall, the current ratio of the company is always kept at a quite high level and shows a stable ability in paying short-term liabilities With this data, the bank can completely feel secure when lending the company short-term loans to supplement working capital for the company's operations ii Quick Ratio (= (Current Assets - Inventory) / Current Liabilities) 20 TIEU LUAN MOI download : skknchat123@gmail.com Quick ratio represents the company's ability to pay short-term debts from short-term assets that can be converted to fast money Like the current ratio comparison table, the quick ratio of Vinamilk decreased gradually while this ratio of the two rival companies increased strongly Looking at the table, at the end of 2017, Vinamilk's quick ratio was the highest among the companies (1.6 times), but, just years later, Vinamilk's ratio was significantly lower than the other However, that was not a problem because other liquid assets were still enough to ensure Vinamilk's debt obligations Another note is that the quick ratio of Vinamilk was much smaller compared to the current ratio, which means that inventories contribute a significant proportion to the company's short-term assets iii Cash Ratio (= Cash / Current Liabilities) 21 TIEU LUAN MOI download : skknchat123@gmail.com Cash ratio represents a company's ability to instantly pay off any outstanding debts or unexpected expenses In 2017, the cash ratio of Vinamilk reached the bottom with the coefficient of only 0.09 times That means the company's cash and cash equivalents are just enough to be able to immediately pay off 1/10 of all short-term debts It can be said that at that time, Vinamilk had great difficulties in meeting all these debts However, after years, Vinamilk's cash ratio has gradually increased again, from 0.09 in 2017 to 0.18 in 2019 Although the VNM is still much lower than the same year coefficients for BHN (0.56) and VCF (0.28), it is showing signs of a recovery to the stability level Comment: In general, the company's liquidity ratios are at a lower level than the market However, with the company's current liabilities (current ratio is always above 1.5, quick ratio is always above 1), the company's ability to pay debts is guaranteed Although the company's debt is large, short-term assets are always residual to fulfill the debt service obligations when due, thus reducing the risk of liquidity of current and future liabilities In conclusion, the company's financial situation is quite stable Leverage Ratio Debt to Assets Debt to Equity i Total Debt to Total Assets Ratio (= Total Liabilities / Total Assets) 22 TIEU LUAN MOI download : skknchat123@gmail.com Total-debt-to-total-assets is a measure of the company's assets that are financed by debt rather than equity According to the data table, in the period from 2017 to 2019, the debt to total assets ratio of Vinamilk fluctuated from only 0.30 to 0.33 This means the company had a policy of using debt at a reasonable and stable level over time and the financial autonomy of VNM was very good when having guaranteed equity capital of more than 65% of total assets value and being less affected when there are interest rate fluctuations in the market In addition, in 2019, Vinamilk's debt usage level is not much different from the two companies in the same industry ii Total Debt to Total Equity Ratio (= Total Debt / Total Equity) 23 TIEU LUAN MOI download : skknchat123@gmail.com The ratio is calculated by taking the company's total debt and dividing it by the book value of common equity In general, during the comparison period, the ratio of Vinamilk was not more than 0.50 In 2019, compared to the other companies, VNM’s ratio was not much different They all had the number around 0.50, which is at a safe level This means Vinamilk and their two rival companies had stable financial ability Comment: Vinamilk has a strategy to use its equity capital in investment activities rather than borrowing from banks Vinamilk's financial capacity is very good, and the company has very little risk of debt balance But using too much equity will affect the ability to improve company profits and dividends distributed to shareholders It is very safe to provide credit to Vinamilk Efficiency Ratio Operating Profits/Net sales TIEU LUAN MOI download : skknchat123@gmail.com Profits after tax/ Equity (ROE) Profits after tax/ Total assets (ROA) EBIT/ Interest expenses 25 TIEU LUAN MOI download : skknchat123@gmail.com i Profit ratio from business activities The company's core business for the ratio of profit to net sales tends to decrease slightly, from 20.14% to 19.74% in the period 2017-2019 Profit from operating activities is always approximately 20% of Vinamilk, although slightly decreased, but compared to the same industry in 2019, BHN, this ratio is still at a stable high level, nearly 3.5 times higher Meanwhile, in 2019, VCF has witnessed a strong growth, surpassing VNM in this index to take the lead among enterprises ii ROA coefficient The ratio of profit after tax to total assets of Vinamilk in the period 2017-2019 decreased from 32.15% in 2017 to 25.79% in 2019, compared to companies in the same industry, BHN and VCF, billion This number of VNM was nearly times and times higher in 2017, but by 2019, VCF was leading with 30.65%, times higher than that of BHN and 1.2 times of VNM However, the ROA of this company VNM remained above 20% Although VNM witnessed a slight decrease in its ROA, it is still a very impressive indicator even for Vietnamese and international businesses, not to mention the company's ability to maintain long-term Compared with many businesses in the dairy and food business in Vietnam, this is a very impressive rate of return on assets This shows that the company has used its assets very well in making profits for the company iii ROE coefficient The ratio of profit after tax on equity of Vinamilk also decreased significantly Return on capital tends to decrease gradually over years, from 44.49% in 2017 to 37.79% in 2019 Comparing with the overall coefficient of the whole industry, BHN and VCF companies, in 2019, Vinamilk's profitability is high while VCF is tending to grow stronger (within just year, VCF has witnessed a significant increase in ROE ratio more than times from compared to 2017) and have a trend of sustainable growth On the other hand, this ratio in BHN enterprises is at a very low level below 20%, compared to other companies in the same industry, this is a worrying number for investors iv Ratio of the ability to pay interest on EBIT / interest The ratio of profit before tax and interest to loans of Vinamilk in the period 2017-2019 decreased sharply by 50% per year However, because Vinamilk's loans are not much and profitability fluctuates reliably compared to the whole industry, the company's ability to repay debts is still at a reliable level Meanwhile, the ratios of the two companies in the same industry, BHN and VCF, in 2019 were only 1/5 and 1/3 of that of VNM From there, we can 26 TIEU LUAN MOI download : skknchat123@gmail.com see that, although the profit earned from Vinamilk's business activities is not the highest among the enterprises, VNM's ability to pay interest is the largest, meanwhile, the profit VCF's operating profit has the strongest growth in 2019, but its ability to pay interest is only 1/3 of Vinamilk's, showing that this company's loan is quite high compared to VNM BHN enterprise has the lowest index among companies in the same industry at 22.54, showing that its ability to pay interest on EBIT is relatively low because revenue from operating activities is quite small compared to businesses business remaining Comment: The profitability that Vinamilk has shown in the 2017-2019 period tends to decrease slightly but is still reliable for investors 27 TIEU LUAN MOI download : skknchat123@gmail.com Market price indexes Price to Earning Ratio Price to Book Ratio i Price to Earning Ratio (P/E) Overall, Vinamilk's P/E ratio at the end of 2019 is 19.17, an increase of 1.13 units compared to 2018 but still a significant decrease compared to the P/E ratio in 2017 When compared to the company the competitor is BHN, the P/E ratio of Vinamilk over the years from 2017 to 2019 is significantly lower, but still higher than the other competitor VCF In 2019, The difference was apparent when Vinamilk was 13.27 units behind BHN and 12.22 units higher than VCF Investors are still expecting Vinamilk's future growth when there are many projects to be implemented, but when compared to its rival company, Vinamilk's profitability and growth are only at medium level average, not the highest compared to the whole industry 28 TIEU LUAN MOI download : skknchat123@gmail.com ii Price to Book Ratio (P/B) Vinamilk's P/B ratio has decreased significantly from 12.98 to 7.95 in 2017 to 2018 and slightly decreased to 6.82 in 2019 but it is still a positive sign which double of the two rival companies This shows that the company is doing well and the income per asset is high Comment: The market is currently valuing Vinamilk's shares at a high level compared to the current value as well as other companies in the market The reason is due to the market's expectations about the company's ability to develop well and stably The safety of Vinamilk's stock investment has changed from year to year Vinamik's profitability is highest and most stable in 2018, with an increase in 2019 but not too stable Besides, the profit from dividends to investors is not high However, Vinamilk is still evaluated quite well compared to other companies in the same industry and its share price has also increased over the years, so Vinamilk's share price difference profit can still reach a good level 29 TIEU LUAN MOI download : skknchat123@gmail.com IV Conclusion The financial analysis of Vinamilk in the 2017-2019 period shows that Vinamilk is a company with still good financial status, stable liquidity, and good development ability in the coming time Growth in the company's revenue and profitability meets investor requirements Good financial position, suitable for providing credit The company's exposure to insolvency is very low ~ THE END ~ 30 TIEU LUAN MOI download : skknchat123@gmail.com ... 16 Analysis of Balance Sheet 16 Analysis of Cash Flow Statement 18 Analysis of Income Statement 19 Analysis of Vinamilk's financial ratios compared to rival companies. .. i Total Debt to Total Assets Ratio (= Total Liabilities / Total Assets) 25 ii Total Debt to Total Equity Ratio (= Total Debt / Total Equity) 26 Efficiency Ratio 27 i Profit... Debt to Assets Debt to Equity i Total Debt to Total Assets Ratio (= Total Liabilities / Total Assets) 22 TIEU LUAN MOI download : skknchat123@gmail.com Total-debt -to- total-assets is a measure of