Group report financial analysis hoa binh construction (HBC)

Group Report Financial Analysis Hoa Binh Construction (HBC) Group – CF4 Lecturer: Dr Tu Thi Kim Thoa & Dr Vo Hong Duc Presentation link: https://www.youtube.com/watch?v=SfAXH16VNPY Calculation sheet link: https://docs.google.com/spreadsheets/d/1rH03jDnyd5SsVLbzVbzlLQsrs6gjpplYF0sfaUwfVco/edit?usp=sharing TABLE OF CONTENT I Introduction II Financial Analysis 2.1 Balance Sheet 2.1.1 Competitor Comparison 2-3 2.2 Analysis of profit/loss 4-5 2.2.1 Competitor Comparison III Ratio Analysis 3.1 Liquidity Ratios 3.1.1 Current ratio 3.1.2 Quick ratio 10 3.1.3 Cash ratio 10-11 4.1 Efficiency Ratios 11 4.1.1 Inventory turnover ratio 11 4.1.2 Receivable turnover ratio 11-12 4.1.3 Total assets turnover 12 4.1.4 Fixed assets turnover 12 5.1 Long-term Solvency Ratio 13 5.1.1 Total debt ratio 13 5.1.2 Debt-equity ratio 14 14-15 5.1.3 Equity multipliers 5.1.4 Times interest earned ratio 15 15 5.1.5 Cash coverage ratio 16 6.1 Profitability Ratio 16 6.1.1 Profit margin ratio 16 6.1.2 Return on Assets (ROA) 17 6.1.3 Return on Equity (ROE) 18 IV Conclusion 19 V Reference list 20 VI Appendix I Introduction The full name of the company is Hoa Binh Construction Group Joint Stock Company This firm was established in 1987 under the name Hoa Binh Construction Office, and on December 1, 2000, it changed its name to Hoa Binh Construction and Real Estate Joint Stock Company Finally, on its 30th anniversary, the firm formally changed its name to Hoa Binh Construction Group Joint Stock Company in 2017 Currently, this company is located in Pax Sky building, 123 Nguyen Dinh Chieu, Ward 6, District 3, Ho Chi Minh city, and its internet address is https://hbcg.vn/ The firm is operating in the construction industry, providing customers with services related to general contractions and design In the third quarter of 2021, Hoa Binh surpassed Coteccons to become the largest contractor in Vietnam with a market capitalization of up to 5,902 billion VND BDO was Hoa Binh's first audit firm in 2010 However, the company has had long-term cooperation with Ernst & Young since 2011 The Ho Chi Minh City Stock Exchange (HOSE) listed and traded Hoa Binh shares under stock exchange code HBC in 2006 This is the first construction company in the South to list on the Vietnamese stock exchange Based on the Hoa Binh organization and operation Charter, the number of members on the Board of Directors ranges from five to eleven The total number of independent members on the Board of Directors must account for at least one-third of the total number of board members Currently, the firm is managed by an eight-person Board of Directors, including Mr Le Viet Hai, Chairman of the Board of Directors, Mr Le Viet Hieu, CEO, and Mr Le Quoc Duy, Deputy CEO Organizations and people who own shares in a joint-stock corporation are entitled to earnings and may participate in managing the business Mr Le Viet Hai is the current top shareholder of HBC, owning 16.05% of the company's stock, or 38,913,741 shares Hyundai Elevator Co., Ltd., Korea Investment Management Co., Ltd., and KIM Vietnam Growth Equity Fund came in second, third, and fourth, with ratios of 10.31%, 4.87%, and 4.51%, respectively These are the four largest stockholders of HBC Hoa Binh has ten subsidiaries in the real estate and production-service industries The following is a list of the firm's four majority-owned subsidiaries, together with information on their ownership rate and authorized capital Name Ownership rate Authorized capital (%) (VND) Hoa Binh House Joint Stock Company 94% 126,900,000,000 MATEC Construction Machinery One Member Joint Stock Company 100% 100,000,000,000 100% 7,946,000,000 Hoa Binh Design Consulting Co., Ltd (HBA) Hoa Binh Paint Company Limited (HBP) II 100% 2,000,000,000 Financial Analysis 2.1 Balance Sheet Hoa Binh construction group joint stock company BALANCE SHEET 2018, 2019 and 2020 2018 2019 2020 Total Current Assets 13,522,627,868,006 14,422,884,191,144 13,608,268,570,855 Total Non-current Assets 2,377,875,221,206 2,298,412,717,468 1,943,981,370 Total Current Liabilities 12,313,166,533,374 12,043,995,711,928 10,747,646,462,610 664,509,006,514 717,537,473,325 656,578,892,084 2,922,827,549,324 3,959,763,723,359 4,148,024,586,677 Total Non-current Liabilities Total Stock Equity The given balance sheet table illustrates the figure of HBC in terms of separate categories: current and noncurrent assets, current and non-current liabilities, as well as the stock of equity over three years 2018, 2019, and 2020 Overall, the consequences of the Covid 19 pandemic caused significant changes in the whole figure of HBC in the balance sheet of 2020 This year witnessed a significant downward trend in the total assets compared with the previous year, which fell by 18.6% The figure remarkably decreased after a year The long-term investments were almost only 0.08% (2 billion VND) of approximately 2,300 billion of that of 2019 at the end of 2020 It is because the high level of financial leverage negatively affected this construction firm in the situation of debt recovery activity slowly during the pandemic (Vietstock, 2020).On the other hand, the total liabilities and equity of stockholders had a different trend in the same year, which sharply dropped by 19% and climbed up by 4.8%, respectively Even though the total assets dramatically collapsed, positive trends can be seen in the other categories, which means HBC effectively controlled its debt and maintained the value of stock equity in 2020 In 2019, HBC reached the highest number in the total assets at 16,721 billion VND (mainly in the short-term investment) among three years, which increased by 5% compared to that of 2018 Besides, the total liabilities figure had a gradual decrease by 1.7%, while that of long-term debts accounted for the greatest one for three years with over 717 billion VND This is due to the financial burden that many customers of HBC not pay on the schedule committed in construction contracts Furthermore, the litigation between HBC and FLC has forced this firm to have a huge debt at the end of 2019 (Chi, 2021) In terms of stockholder's equity, there was a considerable rise of more than 35% in 20182019 This indicates the trust of foreign investors in HBC's long-term prospects Regarding the general view of HBC in 2018, this is a challenging year for HBC in the payment of debts, which recorded the most outstanding amount of total liabilities of nearly 13,000 billion VND for three years Still, HBC had higher financial leverage since its total liabilities exceeded its whole equity Despite a reduction in net profit due to fierce competition in the construction market at the beginning of 2018, HBC was steady in its overall assets at 15,900 billion VND As shown from the given balance sheet, HBC had increased significantly in the proportion of shareholder's equity throughout the years, which is a positive sign for investors in the future 2.1.1 Competitor Comparison Coteccons Construction Joint Stock Company (CTD), established in 2004, is one of the leading construction units in Vietnam with a series of large projects in the country with the role of the general contractor, design and construction, E&C, EPC for civil and industrial projects: high-rise residential projects, large-scale projects of commerce, education, hotels and resorts, industrial plants Besides being the largest private construction enterprise in Vietnam, Coteccons was ranked 56th in the Top 500 Largest Enterprises in Vietnam in 2020, which was organized by VNR500 Current Asset The first chart illustrates the current assets of HBC from 2018 to 2020 compared to CTD; both firms had different trends from each other The current assets trend of HBC had a slight increase, from 85,05% to 87,50% throughout three years This could be explained by the fact that the inventory rate of HBC has increased rapidly by 35.72% from 2018 to 2020 Meanwhile, CTD recorded a decrease from 91,09% to 90,89% during the same period; however, it was still higher than HBC by the end of 2020 Non-Current Asset Yet, the growth trend of HBC and CTD in the noncurrent asset category contrasted to the current asset category just noted above In which the percentage of HBC decreased gradually, the non-current asset of HBC dropped from 14,95% to 12,50% At the same time, CTD recorded a slight increase in growth from 2018 to 2020 In particular, HBC was still higher compared to CTD; instead, it rose from 8,91% to 9,11% So, it seems that HBC is currently working its way to reduce its non-current by possessing and its non-current asset decline is mainly due to a significant decline in intangible assets as it reduced by 86,52% Current Liabilities In terms of current liability, the percentage of CTD remained higher than HBC throughout the period, although it had a minor reduction in 2019 by 0,15% and then rose back to 99,90% in 2020 In three years, the proportion of HBC current liabilities declined by 0,64%, from 94,88% to 94,24% In conclusion, CTD's current liabilities, accounting for approximately 100%, will put more pressure on the firm's financial structure At the same time, HBC stills may be spared some of its efforts and resources to its activities as the current liability, which requires short-term payment, is accounted for only 95% HBC's current liability is lower than CTD's because they still have a long-term debt to pay Non-Current Liabilities There is a clear difference in the long-term liabilities category of the two companies HBC and CTD HBC recorded a rise in non-liability from 5,12% to 5,76%, while the percentage of CTD stayed at a minor of 0.10% Unlike HBC, which borrowed long-term debt, CTD's non-current liabilities are minimal They have a large gap with HBC because CTD has not borrowed any long-term debt and its non-current liability mainly comes from long-term provisions Owner’s Equity Both firms have had their percentage of owner equity rise progressively throughout the period Between 2018 and 2020, the proportion of HBC grew moderately from 18,38% to 26,67% At the end of 2020, the owner equity rate of CTD recorded double that of HBC, with 59,32% and 26,67%, respectively HBC's equity growth mainly comes from the increase in share issuance, while CTD still maintains a high proportion thanks to the investment and development fund 2.2 Analysis of profit/loss Hoa Binh Construction Group (HBC) INCOME STATEMENT 2018, 2019 and 2020 VND Total Revenue 2018 2019 2020 18,299,333,668,495 18,609,736,913,753 11,224,652,702,542 COGS -16,612,292,699,871 -17,363,849,322,168 -10,488,433,463,113 Total Expenses -17,253,322,420,033 -17,930,647,265,157 -10,977,028,146,653 Any non-operating gains and losses; -242,041,921,536 -139,330,086,219 -121,764,722,650 2,875 1,717 340 Earning per common share As we can see from the income statement, the company's revenue slightly increased in 2019 from 2018, but it fell dramatically in 2020 to 60% from the previous year As a result, COGS directly related to total revenue increased lightly in 2019 and dropped significantly in 2020 like the total revenue However, during 2019, it seemed that COGS increased more than what it was supposed to at 4.52% compared to the expected 1.7% like in revenue The reason may be the unexpected increase in material price without the appropriate adjustment in price left the COGS increased significantly compared to its revenue The total expenses are the sum of COGS and other expenses incurred during the year Because the company kept its other expenses at a constant rate and COGS took the major proportion in total expenses, the COGS pattern played a vital role in shaping the total expenses pattern Therefore, the notable increase in COGS also made total expenses increase moderately before both figures plummeted in 2020 On the other hand, at first glance, the company is having trouble with non-operating activities as non-operating gains were negative for the three years The significant losses were due to the huge amount of interest expense while interest income can not offset the cost The interest expense number was constant for three years from the income statement Therefore, other income and interest income are the major players determining the non-operating losses or gains Due to the increase in other income and interest income, the company managed to reduce the losses by 40% from figures in 2018 and 12% in 2019 With the last figure, earning per common share pattern was different from other variable patterns considered until now Even though HBG's total revenue slightly increased in 2019, the earnings per common share lost up to 40% from its previous number In 2020, things were getting worse as the earning per share reduced dramatically from 1,717 to only 340 (at a loss of 80%) The reason is that it is due to a significant amount of shares outstanding issued in HBC during 2019 at 25,000,000 shares, while the pandemic affects the EPS in 2020 (Co phieu 68, n.d.) 10 2.2.1 Competitor Comparison Revenue: Overview, Hoa Binh Construction has lower revenue compared with Coteccons during the period The most obvious inference from the chart is that the gap between the two companies is getting smaller as time progresses HBG was improving slightly in 2019 while CTD fell miserably in the same period before both companies suffered heavy losses in revenue during 2020 The slight increase or significant decrease in revenue during this period reflected the construction market in the covid-19 pandemic where both companies could not attract any potential contracts, which resulted in an unchanged or decrease in revenue Specifically, CTD was in the middle of reconstruction of its structure Therefore, it is understandable that CTD's revenue dropped significantly during 2018-2020 COGS As said earlier, the COGS movement was reflected in the direction of total revenue Therefore, as total revenue increases or decreases, COGS will act in the same manner There is an increase in COGS proportionate to the total revenue rate from 2018 to 2020 in both companies This may be explained by the fluctuation in material price that led to an increase in COGS in these two companies Furthermore, one of the most significant points here is that Hoa Binh 11 Construction has a lower COGS over total revenue rate than CTD from 2018 to 2020 Thus, HBG was maybe more efficient in utilizing its material and related working cost than CTD Total expenses As explained above, the move of total expenses is also directly affected by the move of COGS and total revenue The pattern and extent of total revenue determine the shape and size of the total expenses, while COGS increased the proportion of total expenditure to total revenue It is intriguing that although HBC had a lower COGS proportion to revenue, its total expenses proportion to total revenue was higher than CTD's numbers Thus, the reason may lie in the operating cost It appears that although revenue decreased significantly in 2020, the selling and administrative expenses in HBC just reduced slightly As a result, HBC recorded its negative earnings in 2020 due to the inappropriate structure cost In conclusion, although having a smaller percentage of COGS in total revenue than CTD's figure, HBC's total expenses percentage in revenue was higher than CTD's amount due to improper expenses of selling and administrative expenses Thus, HBC must be cautious in handling its costs 12 Non-operating gains or losses Regarding non-operating income, HBC had a steady growth from 2018 to 2020, while CTD decreased significantly HBC grew by 42.44% in 2019 and 12.61% in 2020 Coteccons, on the other hand, declined by 33.576% and 14.41% within the same period In particular, in 2019, both companies experienced major changes While HBC gained from non-operating cost increased from -242,041,921,536 VND to -139,330,086,219 VND, CTD fell sharply from 447,561,020,947 VND to 297,287,683,241 VND This can be explained by the sharp increase by 586.41% in HBC net other income from 18,020,352,445 VND in 2018 to 123,693,937,042 VND in 2019 before declining to 85,736,215,661VND in 2020, whereas CTD continues to decrease in this period Thus, although HBC was doing better regarding non-operating gains, It was still lacking behind CTD in this aspect Earnings per common share Earnings per share perform the function of the profitability indicator of a firm; it reflects how much money a business makes per share and can be used to measure the enterprise value In general, the earnings per share of CTD was higher than that of HBC even though the proportion of both companies was gradually decreasing from 2018 to 2020 However, Coteccons's indices were constantly greater than Hoa Binh's, with the highest distinction in 2020, when Coteccons's proportion was 12.24 times higher than Hoa Binh's It is apparent that in 2020, Hoa Binh suffered a significant reduction as earnings per share plummeted by 80.20% from 1,717 to 340, whilst Coteccons drop remained consistent between 2019 and 2020, with a decrease of 51.76 percent and 52.98 percent, respectively The Covid-19 epidemic is one of the factors influencing company dividend cuts The pandemic hampered debt collection while the corporations still required a certain amount of money to sustain manufacturing and business, impacting cash flow (Mai Phuong, 2020) 13 III Ratio Analysis 3.1 Liquidity Ratio 3.1.1 Current ratio The current ratio would show how well the corporation pays its debt to creditors In this chart, the current ratio of HBC was just above one, which means they still have the ability to pay debt; as long as they made assets, most of their assets would pay for their liabilities Although they still can repay, its high fixed asset ratio shows that HBC has difficulty paying off its debt This ratio has slightly increased its ability to pay debt from 1,098 to 1,266 Compared to CTD, they had a higher current ratio than HBC, so their debt payment ability was more favorable than HBC, which recorded a double number in 2020, 2,24 compared to 1,27 3.1.2 Quick ratio Similar to the current ratio, HBC's quick ratio is still weaker than CTD Quick ratio shows a company's shortterm liquidity and measures its ability to meet its short-term obligations with the most liquid assets In 2018, the quick ratio HBC was 0.95, which was below one, representing the stagnation of capital in cash And in the next two years, HBC's quick ratio increased slightly from 0.94 to 1.03, which shows that HBC has done a good job in maintaining liquidity at approximately Besides that, the quick ratio of CTD remained higher than HBC throughout three years, from 1.57 to 1.98 However, this index is too high than normal Recording in 2020 was approximately equal to This was not good because too much cash capital would lead to low working capital turnover, resulting in decreased efficiency in capital use After all, HBC has better short-term liquidity than CTD 14 3.1.3 Cash ratio There is a different trend from the current ratio and the quick ratio above with the cash ratio The cash ratio shows a company's liquidity, namely the ratio of its total cash and cash equivalents to its current liabilities During 2018 and 2019, HBC recorded a higher cash ratio than CTD, from 0,02 to 0,05 Meanwhile, the ratio of CTD fell insignificantly from 0.017 to 0.015 HBC cash ratio peaked at 0.05 in 2019, which was four times higher than CTD However, CTD had surpassed HBC when it recorded a cash ratio at 0.04 in 2020, while HBC has dropped to 0.02 HBC's cash ratio peaked in 2019 compared to the general average in years at 0.02, which can be explained by the fact that in 2019 HBC did not invest much when the short-term investment dropped sharply by 17% from 2018 to 2019 In 2020, CTD surpassed HBC because of better debt settlement when CTD short-term debt plummeted by 25%, a sharper decrease than HBC's 11% decrease 4.1 Efficiency Ratios 4.1.1 Inventory turnover ratio Inventory turnover ratio is described as a financial metric that reflects the percentage of times a company's inventory is purchased and restored in a certain period Looking at the given figure, although HBC had a slight increase by 0.07% in the inventory turnover ratio from 2018 to 2019, it cannot be an offset against the significant drop by over a half of the previous amount at the end of 2020 This is a pessimistic tendency of HBC in inventory management as the firm has faced the destructive impacts of the Covid 19 pandemic during the year 2020 In terms of its opponent – Coteccons, a negative trend can be witnessed in its inventory turnover ratio during three respective years, which hit bottom at -18.52 in 2018 Although data of CTD in the Inventory turnover ratio is still in negative numbers, it revealed a gradual upward trend throughout the years This indicates that CTD made all its efforts to revive the sales as well as inventory stock during the period Generally speaking, the highlighted contrast of both 15 companies in Inventory Turnover ratio indicates how effectively they manage their inventories over the period 20182020 4.1.2 Receivable turnover ratio The receivable turnover ratio is a measurement of how rapidly a firm collects credit-based sales The ratio also determines how frequently a firm's receivables are converted to cash over time As can be seen from the chart, HBC outnumbered CTD almost two times in the receivable turnover ratio over time Notwithstanding, although HBC presented a slight drop in the period of 2018-2019, the ratio significantly climbed up by over 50% at the end of 2020, revealing that this construction corporation did efficiently in the receivable collection and had a high number of reliable customers that pay their debts on time Coteccons seems to not have high receivable turnover ratios as its competitor; however, this company had a ceiling tendency in this figure throughout the years To be more specific, there was a moderate change in the amount of CTD’s receivable turnover from 2018-2019 After a year, this firm's number of accounts turnover ratio experienced a considerable improvement by 0.16% Both corporations generally show an uplifting trend in the receivable turnover ratio over time, yet, the greater the receivable turnover ratio a firm has, the safer investment 4.1.3 Total assets turnover The total asset turnover ratio illustrates how effectively a company's assets are used to generate income by comparing the value of its sales or revenues to the value of its assets The chart reveals that both firms' total assets turnover has a descending trend from 2018 to 2020 CTD keeps the ratio higher than HBS, although it also decreases over time The Coteccons ratios are approximately 1.4 times higher than the HBC indexes The asset turnover ratio of Hoa Binh went below in 2020, which is a negative sign for the firm since it signifies that total assets cannot produce enough income at the end of the year Sales are the most influential component in this ratio According to the 16 statistics, assets declined marginally, while revenues for both enterprises fell by roughly 40% Covid-19 has had a considerable influence on the construction business in 2020, with more than 30% of company projects were postponed and delayed, resulting in a higher drop in sales than previous years (Construction+, 2020) 4.1.4 Fixed assets turnover The performance of a company to generate net revenue from its fixed asset investments, meaning property, plant, and equipment, is measured in fixed asset turnover ratio by comparing sales to fixed assets The higher the fixed asset turnover ratio of a corporation, the more likely it is to generate revenue through the effective use of fixed asset investments It is explicitly observed that both corporations saw a continuous reduction during a three-year period from 2018 to 2020 The fixed asset turnover ratio of Coteccons was around two times greater than Hoa Binh's, namely 2.9, 2.44, and 2.49 times, respectively The preceding figures show how efficiently Coteccons compares to Hoa Binh in generating money for the organization by utilizing the fixed assets 5.1 Long-term Solvency Ratio 5.1.1 Total debt ratio The total debt ratio quantifies a company's leverage or the proportion of a company's assets that are funded by debt In both firms, this ratio has been declining during the last three years The total debt ratio of Hoa Binh is roughly 1.5 times that of Coteccons in 2018 and 2019, precisely 1.54 times in 2018 and 1.58 times in 2019; however, this disparity widens to 1.7 times in 2020 This shift can be explained by the decline in the total debt ratio of Coteccons, which fell by 14.58% from 0.48 to 0.41 in 2020 Both firms have a ratio smaller than one, indicating that the majority of the company's assets are funded by equity When interest rates abruptly rise, Hoa Binh has a more significant likelihood of default than Coteccons 17 5.1.2 Debt-equity ratio The debt-equity ratio is a financial leverage metric that is computed by dividing the company's total liabilities by the shareholder's equity The debt-equity ratio of both companies had a downward tendency during the three years period However, this ratio of Hoa Binh is consistently 3.5 times greater than Coteccons, particularly four times in 2018, 3.5 times in 2019, and 3.9 times in 2020 Hoa Binh fell by 27.48% in 2019, from 4.44 to 4.44, while Coteccons declined dramatically in 2020, from 0.91 to 0.69 Overall, Hoa Binh's stock is riskier for shareholders than Coteccons' since the greater this ratio, the riskier the firm's stock is 5.1.3 Equity multipliers As can be seen from the chart, HBC possessed a higher equity multiplier than CTD ones Although both companies had nearly the same number in total assets, the big differences in total equity between CTD and HBC eventually led to the wide gap in equity multiplier between the two companies CTD's equity multiplier is lower than HBC because the company is strongly financed by equity, while HBC preferred more on the debt aspects Because the total assets of both companies remained the same or with slight fluctuation, the changes in equity multiplier largely contributed to total equity Thus, the decrease in equity multiplier in HBC is due to the moderate increase in total equity in this period, especially in 2019 With Ctd, due to no significant change in total equity, its equity multiplier remained stable from 2018 to 2020 Different finance structures in each company will be more transparent in these two following ratios 18 5.1.4 Times interest earned ratio Year 2018 2019 2020 Times interest earned ratio (HBC) 5.51 3.86 2.32 Times interest earned ratio (CTD) 7,146.02 112,133.67 2,007.54 Times interest earned ratio is an indicator to identify whether the earnings before interest and taxes (EBIT) allow the company to cover its interest cost With the latest figure, it is still appropriate to assume that HBC can cover that cost without any problems However, due to the unsuccessful 2020 business year and new debt issued in 2019, HBC's EBIT fell while the interest remained constant during the year, which left the company a huge burden to carry As a result, the time interest earned ratio has been steadily decreasing in years This is an alert signal for HBC and every company that prefers using debt to leverage that if the income falls terribly while the interest expenses remain constant during some unexpected outcome, the company is likely near the verge of bankruptcy Thus, companies must take precautionary steps and possess some reserved resources that can pay off the interest in the short-term in some unforeseen circumstances On the other hand, CTD possessed an admirable number that the figures even reached their peak in 2019 The most obvious reason is that the company has hardly resolved to use debt to finance its operation The significant increase in time interest earned ratio during 2019 was because the company resorted some of the debt and left the interest expenses at the lowest number compared to 2018 and 2020 However, on the other hand, in 2020, CTD's time interest earned ratio is the lowest in the period The reason is that during 2020, CTD was issuing more debt and incurred more interest expenses 5.1.5 Cash coverage ratio Year 2018 2019 2020 Cash coverage ratio (HBC) 7.59 6.25 5.16 Cash coverage ratio (CTD) 8,710.11 161,259.15 3,236.32 The cash coverage ratio is the time interest earned ratio but does include depreciation and amortization into EBIT Due to the increase in EBIT from depreciation and amortization, the same pattern was observed in both companies, with figures higher than the time interest earned ratio With HBC, the number was decreasing during the period; however, the decrease amount is less than the time interest ratio Thus, with depreciation and amortization included in the equation, HBC is more likely to pay off its short-term 19 obligation With CTD, it seems that the cash coverage ratio is not really different from the time interest earned ratio Therefore, the amount of depreciation and amortization in CTD is lower than compared with HBC 6.1 Profitability Ratio 6.1.1 Profit margin ratio Profit margin is defined as the proportion of sales that has been converted into profit, and it is used to determine how well a company or corporation is doing financially In general, the profit margin of both companies was on a three-year declining trend CTD has the greatest decline in 2019 at 43.48%, from 5.29% to 2.99% However, in 2020, HBC's profit margin fell 2.84 times as compared to the same period in CTD, from 2.18% to 0.75% The reason for this issue is a rise in the cost of goods sold in both firms, although CTD has a lower cost of goods sold than HBC Large amounts of interest expenses and unsuitable operating costs left HBC with a low-profit margin compared to CTD Suppose both firms maintain the same decrease in the future In that case, this is a negative signal since if this ratio is closer to zero, it implies that the company is having difficulty controlling expenses or did not generate good sales Profit margin ratios are also essential to investors Therefore raising these ratios is a priority for both organizations 6.1.2 Return on Assets (ROA) Return on assets (ROA) is defined as a measure of the efficiency that a firm uses its assets in terms of profitability In general, both corporations have had the same downward trend in the amount of ROA throughout the years As can be seen from the chart, CTD has the highest figure of ROA at 8.98%, which is twofold that of HBC at the beginning of the period Afterward, 2019 witnessed noticeable changes of the firms in the percentage of ROA, especially in the figure of CTD when it dropped by more than half of the previous one Meanwhile, HBC had a 20 slight decline in the proportion of ROA in the period of 2018-2019 The figure then dramatically reduced by almost 80% of 2019 (from 2.43% to 0.54%) Overall, the lower percentage of ROA of HBC compared with CTD revealed that the company perhaps had over-invested in assets that led to a failure in generating revenue growth This showed a "red flag" for HBC that the firm will possibly be in financial jeopardy in the future 6.1.3 Return on Equity (ROE) Return of Equity (ROE) represents the profitability of the business by measuring the rate of return on the initial investment The higher the ROE, the more efficient the company's capital is However, both firms showed a negative trend when HBC and CTD sank dramatically from 2018 to 2020 The ROE rate of HBC remained higher than CTD in 2018 with 21,22% compared to 18,07% For the next two years, HBC's rate dropped tremendously by nearly 19%, to only 2,02% in 2020, even lower than its rival, which was 3,98% This is an alarming sign for both companies; when letting this ratio drop like that, it is necessary to have specific strategies and actions to pull this ratio up again IV Conclusion In conclusion, on the balance sheet, it is clear to understand that CTD possessed more resources and power than HBC and that CTD's value was still regarded higher than HBC On the other hand, about business activities illustrated on three-year income statements, it is easy to judge that HBC was doing better than CTD It can be said that HBC did work effectively in controlling its assets, reducing the liabilities, and maintaining the value of stock equity even when the company has faced some financial problems with FLC and the negative effects of the Covid 19 pandemic during the period However, cost control in HBC must be managed with strict requirements One of the standout differences between the two companies is that they are leveraged differently HBC preferred debt to finance its operation, while CTD likely used its own equity With different leverage, it is clear that some compared ratios are not really reliable or valid Lastly, as we have known that if taxes are present and there is a sufficient amount of debt in a levered company, a levered company will be better than an unlevered one Therefore, with its equity leverage, CTD will have more potential to grow than HBC 21 V References HBCG (2021) Hoa Binh Construction Group Joint Stock Company - Consolidated financial statements 2020 Retrieved from https://hbcg.vn/storage/pdf/report/20210410070749.pdf HBCG (2020) Hoa Binh Construction Group Joint Stock Company - Consolidated financial statements 2019 Retrieved from https://hbcg.vn/storage/pdf/report/20200413081506.pdf HBCG (2019) Hoa Binh Construction Group Joint Stock Company - Consolidated financial statements 2018 Retrieved from https://hbcg.vn/storage/pdf/report/20190406031523.pdf CCJSC (2019) Coteccons Construction Joint Stock Company - Consolidated financial statements 2018 Retrieved from Consolidated financial statements 31.12.18.pdf (coteccons.vn) CCJSC (2020) Coteccons Construction Joint Stock Company - Consolidated financial statements 2019 Retrieved from https://www.coteccons.vn/app/uploads/2020/03/30/Consolidated-financial-statements-31.12.2019.pdf CCJSC (2021) Coteccons Construction Joint Stock Company - Consolidated financial statements 2020 Retrieved from https://www.coteccons.vn/app/uploads/2021/04/01/Coteccons-31.12.2020-A1-101-Consol-E-.pdf Hà My (2021) Sao đổi Ngơi Ngành xây lắp: Hịa Bình Corp Vượt Mặt coteccons Mọi Phương diện, Trở Thành Nhà Thầu Lớn Nhất Việt Nam Retrieved from https://cafebiz.vn/sao-doi-ngoi-nganh-xay-lap-coteccons-da-laqua-khu-tu-hom-nay-hoa-binh-corp-moi-la-nha-thau-lon-nhat-viet-nam-20211108120531996.chn Hoa Binh Corporation (2018) Service of Hoa Binh Retrieved from https://hbcg.vn/page/7399-service.html CafeF (2021) Cơng ty cổ phần Tập đồn Xây dựng Hồ Bình (HOSE) Retrieved from http://s.cafef.vn/hose/HBCcong-ty-co-phan-tap-doan-xay-dung-hoa-binh.chn Hoa Binh Corporation (2020) Charter of Hoa Binh Construction Group Joint Stock Company https://hbcg.vn/img/Dieu-le-va-quy-che-noi-bo.pdf Hoa Binh Corporation (2018) BOARD OF DIRECTORS Retrieved from https://hbcg.vn/bod Construction+ (2020) Tác động đại dịch COVID-19 đến ngành Xây dựng Retrieved from https://www.constructionplusasia.com/vi/the-impacts-of-covid-19-on-construction-business/ Mai Phương (2020) Doanh nghiệp hoãn trả cổ tức dịch Covid-19 Retrieved from https://thanhnien.vn/doanhnghiep-hoan-tra-co-tuc-do-dich-covid-19-post952331.html 22 Bộ phận Phân tích Doanh nghiệp, Phịng Tư vấn Vietstock (2019, December 12) Góc nhìn đầu tư 2020: Ngành xây dựng Retrieved from Vietstock: Góc nhìn đầu tư 2020: Ngành xây dựng Chi, M (2021, March 13) Tranh chấp FLC Xây dựng Hịa Bình: Bất ngờ lớn sàn chứng khoán! Retrieved from: https://dantri.com.vn/kinh-doanh/tranh-chap-flc-va-xay-dung-hoa-binh-bat-ngo-lon-tren-san-chung-khoan20210312230827877.htm Vietstock (2020) Retrieved from Vietstock: https://finance.vietstock.vn/HBC/tin-tuc-su-kien.htm CafeF (2021) Công ty Cổ phần Xây dựng Coteccons (HOSE) Retrieved from http://s.cafef.vn/hose/CTD-cong-ty-cophan-xay-dung-coteccons.chn Vietnamfinance (2018, May 23) Coteccons: Bước lùi lợi nhuận năm 2018 Retrieved from: https://vietnamfinance.vn/coteccons-buoc-lui-loi-nhuan-nam-2018-20180504224207343.htm Vietnambiz (2021) Coteccons: Kết kinh doanh phản ánh bối cảnh ngành xây dựng năm 2020 trình tái cấu trúc cơng ty https://vietnambiz.vn/coteccons-ket-qua-kinh-doanh-phan-anh-dung-boi-canh-nganh-xay-dung-nam-2020-va-quatrinh-tai-cau-truc-cua-cong-ty-20210203102642682.htm Tuoi tre (2021) Hai cú sốc kéo ngành xây dựng giảm tốc độ tăng trưởng Retrieved from https://tuoitre.vn/hai-cu-sockeo-nganh-xay-dung-giam-toc-do-tang-truong-20210329163410774.htm Co Phieu 68 CTCP Tập đồn Xây dựng https://www.cophieu68.vn/eventschedule.php?id=hbc 23 Hịa Bình - HBC Retrieved from VI Appendix FORMULA Current ratio Current assets/ Current liabilities Quick ratio (Current assets - Inventory)/ Current liabilities Cash ratio Cash/ Current liabilities Inventory turnover COGS/ Inventory Receivable turnover Account receivables/ Sales Total assets turnover Sales/ Total assets Fixed assets turnover Sales/ Fixed assets Total debt ratio (Total asset - Total equity)/Total asset Debt-equity ratio Total equity/Total liabilities Equity multiplier Total asset/Total liabilities Time interest earned ratio EBIT/ Interest expenses (CTD: Finance expenses) Cash coverage ratio EBITDA/ Interest expenses (CTD: Finance expenses) Profit margin Net income/Sales Return on assets (ROA) Net income/Total assets Return on equity (ROE) Net income/Total equity 24 ... is Hoa Binh Construction Group Joint Stock Company This firm was established in 1987 under the name Hoa Binh Construction Office, and on December 1, 2000, it changed its name to Hoa Binh Construction. .. http://s.cafef.vn/hose/HBCcong-ty-co-phan-tap-doan-xay-dung -hoa- binh. chn Hoa Binh Corporation (2020) Charter of Hoa Binh Construction Group Joint Stock Company https://hbcg.vn/img/Dieu-le-va-quy-che-noi-bo.pdf Hoa Binh Corporation (2018)... (2021) Hoa Binh Construction Group Joint Stock Company - Consolidated financial statements 2020 Retrieved from https://hbcg.vn/storage/pdf /report/ 20210410070749.pdf HBCG (2020) Hoa Binh Construction