FINANCIAL ANALYSIS THANH CONG TEXTILE – INVESTMENT – TRADING JOINT STOCK COMPANY (TCG)

FINANCIAL ANALYSIS THANH CONG TEXTILE – INVESTMENT – TRADING JOINT STOCK COMPANY (TCG) CF- T321WSB-3 Lecturer: Vo Hong Duc Group 3 Table of Contents INTRODUCTION ANALYSIS OF THE INCOME STATEMENT 10 RATIO ANALYSIS 17 4.1 Liquidity ratios 17 4.1.1 Current ratio 17 4.1.2 Quick ratio 17 4.1.3 Cash ratio 18 4.2 Efficient ratio 19 4.3 Long-term solvency ratios 21 4.3.1 Total debt ratio 21 4.3.2 Debt to Equity Ratio 22 4.3.3 Equity multiplier 22 4.3.4 Time interest earned ratio 23 4.3.5 Cash coverage ratio 24 4.4 Profitability ratios 24 4.4.1 Profit margin 25 4.4.2 Return on assets 25 4.4.3 Return on equity 26 4.5 Market value ratios 27 4.5.1 Earnings per share 27 4.5.2 P/E ratio 28 4.5.3 Market-to-book ratio 28 CONCLUSION 30 REFERENCES 31 INTRODUCTION Company name: Thanh Cong Textile - Investment - Trading Joint Stock Company (TCG) Telephone: (+84)3815.3962 - (+84)3815.3968 Email: tcm@thanhcong.com.vn Address: 36 Tay Thanh, Tay Thanh Ward, Tan Phu District, Ho Chi Minh City, Vietnam Website: https://www.thanhcong.com.vn/ Thanh Cong company is one of the leading enterprises in the field of textile and garment in Vietnam The company was established in 1976 and was taken over by the State and renamed as Thanh Cong Textile Factory under the Union of Textile Enterprises - Ministry of Light Industry Its mission is to work for the customers, the suppliers, the investors, and the employees by hard-working and continuous innovation aiming to achieve substantial development 1.1 The company’s primary line(s) of business The product lines of Thanh Cong diversify from weaving fabric, knitting fabric, rib, collar, and cuff to chemicals, dyeing substances The company also provides the supplies and equipment dedicated to textile and garment production Besides manufacturing and exporting these products, it also takes part in real estate development projects such as residential buildings and resorts, supermarket operations, The firm operates four yarn plants with a combined capacity of 21,000 tons per year and a textile factory with a million meter per year capacity A garment factory with a total capacity of 18 million goods per year is also part of the firm The company's products mainly serve export markets in the US, Japan, Europe, Korea and China Thanh Cong's growth goal is to concentrate on expanding its core textile-garment industry while also enhancing production capacity and optimizing the present closed manufacturing process Improve product manufacturing processes, worker productivity to boost production speed, and existing research and development capacity to satisfy design and development needs for new goods all at the same time accommodate the ever-changing demands of consumers 1.2 The company's independent (external) audit firm Thanh Cong’s audit firm in 2018 and 2019 was Deloitte However, in 2020, it collaborated with PWC Thanh Cong company was officially listed on the stock exchange of Ho Chi Minh City in October 2007 with the stock exchange code TCM From the day of the beginning, Thanh Cong has continuously increased charter capital nearly times in only years, the dividends paid out every year fluctuating from 10% to 15% 1.3 The company’s board of directors Mr Tran Nhu Tung - Chairman of the board Mr Park Heung Su - Vice chairman of the board Mr Lee Eun Hong - Member of the board Mr Jung Sung Kwan - Member of the board Ms Nguyen Minh Hao - Member of the board Mr Nguyen Van Nghia - Member of the board Mr Kim Il Kyu - Member of the board Mr Kim Jong Gak - Independent member of the board Mr Dinh Tan Tuong - Independent member of the board 10 Ms Huynh Thi Thu Sa - Secretary Of BOD The company’s achievement Through the operation period, Thanh Cong has many famous achievements, ranked in top 500 largest companies in Vietnam and top 500 enterprises with the best growth in Vietnam ANALYSIS OF THE BALANCE SHEET THANH CONG - BALANCE SHEET As of the end of December 2018 VND % 2019 VND % 2020 VND % Total current asset 1,893,146,267,570 58.30 1,624,461,031,246 55.58 1,783,900,889,021 59.93 Total noncurrent assets 1,354,179,751,084 41.70 1,298,343,694,169 44.42 1,192,521,760,253 40.07 Total assets 3,247,326,018,654 100 2,922,804,725,415 100 100 Total liabilities 1,970,927,570,370 60.69 1,497,537,641,889 51.24 1,337,687,708,547 44.94 Total current liabilities 1,701,087,853,546 52.38 1,331,355,715,842 45.55 1,256,932,784,884 42.23 Total noncurrent liabilities 269,839,716,824 166,181,926,047 5.69 2.71 Total stockholders’ equity 1,276,398,448,284 39.31 1,425,267,083,526 48.76 1,638,734,940,727 55.06 Total liabilities and stockholders’ equity 3,247,326,018,654 100 2,922,804,725,415 100 100 8.31 2,976,422,649,274 80,754,923,663 2,976,422,649,274 SONG HONG - BALANCE SHEET As of the end of December 2018 VND % 2019 VND % 2020 VND % Total current asset 1,869,648,282,341 74.17 1,940,921,455,877 75.63 2,001,242,577,202 76.16 Total noncurrent assets 651,328,967,119 24.37 626,512,690,087 23.84 Total assets 2,520,977,249,460 100 100 100 Total liabilities 1,587,254,104,564 62.96 1,330,468,181,943 51.85 1,185,555,218,921 45.12 Total current liabilities 1,485,759,651,787 58.93 1,269,619,775,866 49.48 1,185,555,218,921 45.12 Total noncurrent liabilities 101,494,452,777 4.03 2.37 Total stockholders’ equity 933,723,144,896 37.04 1,235,743,498,194 Total liabilities and stockholders’ equity 2,520,977,249,460 100 25.83 625,290,224,260 2,566,211,680,137 60,848,406,077 2,566,211,680,137 2,627,755,267,289 48.15 1,442,200,048,368 54.88 100 100 2,627,755,267,289 Firstly, a closer look at the current assets of Thanh Cong company and its rival has shown that the figures of Song Hong are overall higher throughout the duration of 2018 to 2020 in comparison With respect to Thanh Cong, there was a little fluctuation starting from 1,893,146,267,570 VND in 2018, then decreasing mildly 2.72% in the next year before reaching 1,783,900,889,021 VND in 2020 Conversely, Song Hong statistics were much higher with a start point of 1,869,648,282,341 VND in 2018 Following that, there was a gradual improvement of 1.46% and 0.53% respectively in the last two consecutive years of duration Generally speaking, Song Hong percentage of current assets over total assets accounted for much more compared to its opponent (15% - 20%), and it also experienced an upward trend throughout the period However, there is a contrast between two companies when it comes to the total long-term assets In particular, Thanh Cong experienced a marginal rose of 2.72% in 2019 after the previous year Nevertheless, the number significantly dropped the amount of 105,821,933,916 VND during the final year of the period On the other hand, Song Hong non-current assets percentage indicates a downward tendency Initiate the figure at 651,328,967 VND in 2018 then decline significantly to 625,290,224,260 in the subsequent year and finally finish the period with a slight increase of 1,222,465,827 VND Secondly, in terms of liabilities, it is clear from the above data that there is a quite similar pattern between Thanh Cong and Song Hong Both followed a slightly decreasing trend across the period of 2018 to 2020 Particularly, Thanh Cong’s total liabilities dropped by 9.45% in 2019 compared to the previous year and this trend continued with a decline of 6.3% in 2020 The similarity of Song Hong's figures indicates that there is also a decrease from 62.96% in 2018 to 45.12% in 2020 The financial status of Thanh Cong improved over time as debt and financial leasing liabilities were reduced, cutting risks while the world faced unanticipated changes that directly impacted the clothing sector in general and Thanh Cong in particular However, the total liabilities were still lower than its competitor The number of Thanh Cong’s current liabilities was moderately higher than the one of Song Hong Both values of the two corporations have a propensity to drop which means that they have higher capacity to pay their debts on time In particular, the current liabilities of Thanh Cong began at 1,701,087,853,546 VND in 2018, fell to 1,331,355,715,842 VND in 2019, and continued slightly decreased about 74 billion VND in the final year As regards Song Hong, the figures steadily reduced from 1,485,759,651,787 VND in 2018 to 1,185,555,218,921 VND at the end of this period Looking at non-current liabilities, there was a steady decline of Thanh Cong and its rival, Song Hong, over the given term Generally, both companies had a small proportion of non-current liabilities Distinctly, it is very noticeable that in the year 2020, Song Hong successfully eliminated all the noncurrent liabilities while Thanh Cong made an attempt to gradually reduce this figure In detail, the noncurrent liabilities rate of Thanh Cong doubled Song Hong in 2018 (8.31% and 4.03% respectively) A year later, this ratio of Thanh Cong fell to 5.69% and stopped at 2.71% in 2020 By having a downward trend of long-term liabilities, the business has shown their capability to pay off debt On the other hand, with a lower starting point, Song Hong quickly reduced this rate to 2.37% in 2019 and remarkably pushed it to 0% in 2020 This, hence, helped the company to maintain its financial structure at a very safe level Finally, contrary to total liabilities, the figures of either firms’ total stockholder's equity climbed steadily over the period of years During the time, Thanh Cong stockholders’ equity grew slightly from 1,276,398,448,284 VND to 1,638,734,940,727 VND which accounting for 39,31% and 55,06% of total liabilities and stockholder's equity In a similar pattern, the equity of stockholders of Song Hong also rose gradually from 37,04% to 54,88% between 2018 and 2020 However, in terms of the money, the gap between them went down rapidly from 342,675,303,400VND to 196,534,892,400VND in three years ANALYSIS OF THE INCOME STATEMENT THANH CONG – INCOME STATEMENT As the end of December Items 2018 Code VND 2019 2020 % VND % VND % Gross revenue from goods sold and services rendered Deduction 3,664,444,938,573 100.00 3,645,052,763,643 100.00 3,470,465,500,295 100.00 2,434,220,386 0.07 852,721,450 0.02 748,691,547 0.02 Net revenue from goods sold and services rendered 10 3,662,010,718,187 99.93 3,644,200,042,193 99.98 3,469,716,808,748 99.98 Cost of goods sold and services rendered 11 2,983,239,599,733 81.41 3,065,482,106,713 84.10 2,849,533,813,239 82.11 Gross profit from goods sold and services rendered 20 678,771,118,454 18.52 578,717,935,480 15.88 620,182,995,509 17.87 Financial income 21 31,910,214,044 0.87 34,621,835,590 0.95 47,765,129,225 1.38 Financial expenses 22 89,470,564,130 2.44 62,099,259,065 1.70 48,057,458,679 1.38 Interest expenses 23 51,903,106,747 1.42 49,405,369,438 1.36 27,743,219,256 0.80 10 Income from associates 24 1,101,784,438 0.03 4,036,714,308 0.11 6,202,234,752 0.18 Selling expenses 25 143,797,019,977 3.92 133,661,898,115 3.67 143,976,177,586 4.15 General and administrative expenses 26 230,042,701,865 6.28 152,923,322,848 4.20 141,947,995,876 4.09 Net operating profit 30 248,472,830,964 6.78 268,692,005,350 7.37 340,168,727,345 9.80 Other income 31 75,594,581,588 2.06 6,653,874,581 0.18 3,242,733,067 0.09 Other expenses 32 638,018,765 0.02 1,312,927,681 0.04 156,775,706 0.00 Profit from other activities 40 74,956,562,823 2.05 5,340,946,900 0.15 3,085,957,361 0.09 Accounting profit before tax 50 323,429,393,787 8.83 274,032,952,250 7.52 343,254,684,706 9.89 Current corporate income tax 51 78,055,995,578 2.13 47,592,471,844 1.31 68,090,938,163 1.96 Deferred corporate income tax 52 15,062,240,587 0.41 9,593,031,085 0.26 1,064,152,737 0.03 Net profit after corporate income tax 60 260,435,638,796 7.11 216,847,449,321 5.95 276,227,899,280 7.96 Basic earnings per share 70 4,069 3,166 3,775 11 SONG HONG – INCOME STATEMENT As the end of December Items 2018 Code 2019 2020 VND % VND % VND % 100.00 3,817,925,016,346 100.00 Gross revenue from goods sold and services rendered 3,950,893,821,662 100.00 4,411,871,787,236 Deduction 67,105,662 0.002 619,023,385 0.01 4,516,183,141 0.12 Net revenue from goods sold and services rendered 10 3,950,826,716,000 99.998 4,411,252,763,851 99.99 3,813,408,833,205 99.88 Cost of goods sold 11 3,157,344,913,122 79.91 3,482,814,704,917 78.94 3,062,364,766,267 80.21 Gross profit from goods sold and services rendered 20 793,481,802,878 20.08 928,438,058,934 21.04 751,044,066,938 19.67 12 Similar to the current ratio, the quick ratio of Thanh Cong is significantly lower than Song Hong figures for years and both are on an increasing trend With respect to Thanh Cong, the firm showed a slight increase beginning from 0.44 (2018) to 0.55 and in 2020, this number has increased to 0.62 With the figure that is less than 1, it is seemingly that Thanh Cong's available liquid assets could not cover all the short-term obligations Besides, there is also a sign of excessive inventory which the company was carrying On the other hand, Song Hong's quick ratio had a strong growth from 0.8 in 2018 jumped to 1.67 after two years which is such an excellent performance Thus, Song Hong possibly can cover its current liabilities and maintain a better firm’s liquidity with stable financial health 4.1.3 Cash ratio The cash ratio is an indicator of a company's liquidity which measures the ability of the business to pay off current liabilities utilizing the company's total cash and cash equivalents 𝐶𝑎𝑠ℎ 𝑟𝑎𝑡𝑖𝑜 = 𝐶𝑎𝑠ℎ 𝑎𝑛𝑑 𝑐𝑎𝑠ℎ 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠 (𝑡𝑖𝑚𝑒𝑠) 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 Although the two liquidity ratios above demonstrate that Song Hong totally achieved a higher position than Thanh Cong over three years, it turns a little bit converse when it comes to cash ratio In specific, Thanh Cong's cash ratio experienced a fluctuation with an increase of 0,54 in 2019 after a previous year, which was greater than Song Hong However, during 2020, Thanh Cong's cash ratio dropped to only 1.15 compared to a substantial increase of 2.29 from Song Hong Overall, Thanh Cong's ability to repay short18 term debt by cash and nearly cash resources is quite fluctuating while its counterpart efficiently covers the current liabilities with a more liquidity ratio 4.2 Efficient ratio: THANH CONG Inventory turnover (times) Days’ sales in inventory (days) Receivables turnover (times) Days’ sales in receivables (days) Total assets turnover (times) 2018 2.62 139.24 13.08 27.90 1.13 2019 3.43 106.29 14.08 25.92 1.25 2020 2.83 128.98 17.39 20.99 1.17 SONG HONG Inventory turnover (times) Days’ sales in inventory (days) Receivables turnover (times) 2018 4.78 76.42 7.71 47.33 1.57 2019 5.28 69.08 10.54 34.62 1.72 2020 4.98 73.30 9.64 37.87 1.45 Days’ sales in Total assets receivables (days) turnover (times) Inventory turnover is a financial indicator that analysts use to determine whether a company's operations are efficient by looking at the times inventory is replaced and sold 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑 𝑠𝑜𝑙𝑑 (𝑡𝑖𝑚𝑒𝑠) 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 Days’ sales in inventory are a financial ratio that shows the average time in days that it takes a company to turn its inventory, including goods being sold, into sales 𝐷𝑎𝑦𝑠 ′ 𝑠𝑎𝑙𝑒𝑠 𝑖𝑛 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 = 365 𝑑𝑎𝑦𝑠 (𝑑𝑎𝑦𝑠) 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 Receivables turnover is an accounting metric used to assess a company's efficiency in collecting receivables and debts from customers 19 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑆𝑎𝑙𝑒𝑠 (𝑡𝑖𝑚𝑒𝑠) 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑒𝑑 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 Days’ sales in receivables are calculated as the average number of days it takes a company to collect cash payments after a sale has been made 𝐷𝑎𝑦𝑠 ′ 𝑠𝑎𝑙𝑒𝑠 𝑖𝑛 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 = 365 𝑑𝑎𝑦𝑠 (𝑑𝑎𝑦𝑠) 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 Total assets turnover is an effective measure in gauging how the enterprise makes use of its assets 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑆𝑎𝑙𝑒𝑠 (𝑡𝑖𝑚𝑒𝑠) 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 20 Next, the following table illustrates the insight into the key differences of efficiency ratios of Thanh Cong and Song Hong A first observation at companies’ inventory turnover highlights that Thanh Cong has a relatively twice as small amount of turnover during a year as its peers Alongside, the firm days’ sales in inventory (about 106,29 days to 139,24 days) also massively greater than Song Hong (from 69,08 days to 76,42 days) through the duration which implies the fact that Thanh Cong is less efficient when it turns to managing the assets to produce sales On average, Thanh Cong needed around 2,62 to 2,83 times to turn over the entire inventory while it took the opponents 4,78 to 5,28 times during the three-year period Nevertheless, the situation goes into reverse when people discuss the receivables turnover ratio Thanh Cong obviously dominated the ratio with an average of 14,85 times turnover during the period of three years, indicating the huge efficiency of collecting receivables Particularly, the year of 2020 has received a huge improvement of the business with 17,39 times turnover Accompany that, Thanh Cong also needed fewer days to collect payment from about 20,99 days to 27.90 days throughout the duration Meanwhile, Song Hong ratio conversely illustrates the longer time to collect receivables and turnover averagely 9,30 times for three years According to equity research from BSC Securities (2021b), Song Hong had an unforgettable year facing the postponement of contract as well as the bankruptcy of its huge customer NewYork&Company which leads to the decrease in receivables turnover in 2020 Finally, the total assets turnover of both companies sees the same pattern, but Song Hong figures emphasize the greater ability to make use of their assets to create earnings 4.3 Long-term solvency ratios 4.3.1 Total Debt Ratio The total debt ratio takes into account all debts of all creditors to offer the view of a company's debt and how it is financed (Debitoor, 2021) 2018 2019 2020 Thanh Cong 0.61 0.51 0.45 Song Hong 0.63 0.52 0.45 Unit: times 𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝑇𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 (𝑡𝑖𝑚𝑒𝑠) 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 21 It is explicitly observed that the total debt ratio of either enterprises had nearly the same ratio In 2018, Thanh Cong debt ratio was 0.61 and decreased to 0.51 in the next year while its counterpart ratio fell 0,11 times in 2019 Moreover, it is worth noticing that both organizations have the same ratio in 2020 with 0.45 which implies that Thanh Cong and Song Hong have the same movement in handling their debts 4.3.2 Debt to Equity Ratio 2018 2019 2020 Thanh Cong 1.54 1.05 0.82 Song Hong 1.70 1.08 0.82 Unit: times 𝐷𝑒𝑏𝑡 − 𝑒𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡 (𝑡𝑖𝑚𝑒𝑠) 𝑇𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 Moving on, debt to equity ratio is a financial as well as liquidity ratio that compares a company’s total debt to total equity The debt - equity ratio shows the percentage of company financing that comes from creditors and investors (My Accounting Course) It can be seen clearly that Thanh Cong and Song Hong have the same sign with both companies' ratios decreasing every year Thanh Cong commenced with 1.54 and went down to 1.05 in 2019 while Song Hong started higher from 1.70 in 2018 dropped significantly to 1.08 in the next year In 2020, the ratio of both companies continued with a downward tendency and reached the equivalent ratio of 0,82 Hence, both entities were making an attempt to reduce the leverage which leads to less risky choices for the investors 4.3.3 Equity Multiplier: 22 2018 2019 2020 Thanh Cong 2.54 2.05 1.82 Song Hong 2.70 2.08 1.82 Unit: times 𝐸𝑞𝑢𝑖𝑡𝑦 𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 = 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑒𝑡𝑠 (𝑡𝑖𝑚𝑒𝑠) 𝑇𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 The equity multiplier is a risk indicator that measures the portion of a company’s assets that is financed by stockholder's equity rather than by debt (Investopedia) In comparison between two enterprises, it is conspicuous that Song Hong slightly outperformed its counterpart and dual organizations experiencing a downward trend over the period Specifically, the ratio between Thanh Cong and Song Hong was nearly the same at 2.05 and 2.08 in 2019 then wrapped up the final year with a corresponding ratio of 1.82 times Looking at the pattern, either entity was putting efforts into getting rid of debt reliance by financing by stockholder’s equity instead 4.3.4 Time interest earned ratio 2018 2019 2020 Thanh Cong 6.23 5.55 12.37 Song Hong 13.33 24.23 18.66 Unit: times 𝑇𝑖𝑚𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝐸𝐵𝐼𝑇 (𝑡𝑖𝑚𝑒𝑠) 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 23 Time interest earned ratio is a measure of a company's ability to meet its interest obligations based on its current income (Investopedia) From 2018 to 2019, Thanh Cong and its opponent move in opposite structure with Thanh Cong having 6.23 times (2018) then slightly reduced to 5.55 times in the next year while Song Hong has a significant increase from 13.33 to 24.23 times However, the situation went twisted during 2020 when the time interest ratio of two companies was reversed, with Thanh Cong rising to 12.37 while Song Hong fell to 18.66 In short, with the pretax earnings, Thanh Cong successfully managed to increase their times of financing interest charges over the three years despite an observed direction in its rival Nevertheless, Song Hong still overall overtook the dominance of time interest ratio in comparison 4.3.5 Cash coverage ratio 2018 2019 2020 Thanh Cong 7.74 7.88 16.67 Song Hong 16.79 29.46 27.34 Unit: times 𝐶𝑎𝑠ℎ 𝑐𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑎𝑡𝑖𝑜 = 𝐸𝐵𝐼𝑇𝐷𝐴 (𝑡𝑖𝑚𝑒𝑠) 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 Cash coverage ratio measures the liquidity of the firm and considers only the cash or cash equivalents (Ratiosys) The table illustrates apparently that Song Hong was completely superior to Thanh Cong throughout the course From 2018 to 2019, Song Hong has an epic rocket growth of 16.79 to 29.46 times (12,67 times) while Thanh Cong has shown no sign of evolving in a year with only 0.14 times rise Notwithstanding, the rule has changed significantly in the following year The ratio of two companies had been reversed concerning a slight collapse of Song Hong from 29.46 to 27.34 at the same time that Thanh Cong remarkably uplifted to 16.67 times Overall, it can be observed that Thanh Cong initially remained constant but then effortly managed to fulfill its current debt 4.4 Profitability ratios Profitability ratios measure either how efficiently a company makes use of its assets or how efficiently the business controls its operations 24 4.4.1 Profit margin: For every dollar of sales, profit margin gauges how much a firm generates profit in net income 𝑃𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 = 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 (%) 𝑆𝑎𝑙𝑒𝑠 2018 2019 2020 Thanh Cong 7.11 5.95 7.96 Song Hong 9.36 10.20 6.08 Unit: % Overall, the figure shows that both companies face the fluctuation of profit which they generate for each dollar of sales within three years Regarding Thanh Cong, the company experienced a slight reduction in 2019 (1,16%) before climbing up to 7,96% in 2020 According to BSC Securities (2021), in comparison with other companies which heavily suffered from the pandemic effects, Thanh Cong appeared to be well-managed of its operation by their own garment resources and an order of 15 billion USD in quarter of 2020 This, therefore, represents one of the reasons for an increase in the Thanh Cong’s profit margin in 2020 In comparison, Song Hong conversely originated with a higher starter of 9,36% in 2018, then slowly rose and ended with a substantial downward trend of 4,12% in 2020 (which can be recognized as an impact of COVID19 pandemic) As you can see from the chart, Song Hong averagely surpassed Thanh Cong throughout the time which leads to the better generating profit for each dollar of sales 4.4.2 Return on assets Return on assets (ROA) is an indicator of how profitable the company is in relation to its assets management The equation of ROA is: 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑎𝑠𝑠𝑒𝑡𝑠 = 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 (%) 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 25 2018 2019 2020 Thanh Cong 8.02 7.42 9.28 Song Hong 14.67 17.53 8.82 Unit: % A look at a chart revealed that Thanh Cong obviously was inferior regarding the ROA of Song Hong firm Commencing from 2018, Thanh Cong had 8,02% of profit per dollar of assets Following that was a marginal tendency of downward in 2019 and eventually upward during the next year (0,6% and 1,86% respectively) On the other hand, Song Hong opened the period with quite a high ROA, but it was still nothing until the following year came with the figure of 17,53% (increased 2,86%) However, after the prime time of efficiently utilizing the assets, the company profitability considerably decreased to only 8,82%, even lower than its competitor This specifies the fact that either business overcame an oscillation concerning the earnings achieved by utilizing assets 4.4.3 Return on equity Whereas ROA calculates how profitable the company is with respect to its net income and assets, return on equity (ROE) indicates the financial performance of firms by looking at the net income and net assets 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 = 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 (%) 𝑇𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 2018 2019 2020 Thanh Cong 20.40 15.21 16.86 Song Hong 39.61 36.40 16.07 Unit: % 26 Generally speaking, Song Hong is obviously dominant in generating profits by utilizing company assets, however, it also sees a downward trend of percentage With Thanh Cong, the fluctuation of approximately 5% occurred between three consecutive years By 2019, the firm had received a moderate fall of 5,19% but then climbed slightly to occupy 16,86% in the ending year In contrast, Song Hong had a massive foundation of 39,61%, which approximately two times higher than the starter of its rival, indicates the fact that the stockholders fared quite well during 2018 This, therefore, means that the company value is somewhat soaring which brings benefit to the firm's stockholders and attracts new investors However, time passed along with the considerable collapse of Song Hong ROE which eventually reached only 16,07% in 2019 (declined totally 23,54%), even lower than Thanh Cong 4.5 Market value ratios 4.5.1 Earnings per share Thanh Cong Song Hong 2018 4,811.33 7764.89 2019 3,744.14 8,995.22 2020 4,457.60 4,635.02 Unit: unit of money Earnings per share is a ratio that reflects the company’s profitability The higher the company’s earnings per share, the more profitable it is (Fernado, 2021) This ratio is calculated as the company’s net income or profits divided by the outstanding shares in the market 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝐸𝑃𝑆 = (𝑈𝑛𝑖𝑡 𝑜𝑓 𝑚𝑜𝑛𝑒𝑦) 𝑆ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 The net income was extracted from the income statement that was already analyzed above For the Thanh Cong company, the earnings per share did not fluctuate very much over the period from 2018 to 2020 The earnings of this company decreased more than 1000 VND per share in 2019 but then recovered in 2020 In the meantime, the figure of Song Hong was not stable In the first two years, 2018 and 2019 Song Hong company prevailed over Thanh Cong company However, at the end of the period, the year 2020 the situation went back to its balanced position To clarify, in 2018, Thanh Cong firm had earnings per share starting at 4,811.33 VND This company also witnessed a slight decrease in 2019 (3,744.14 VND) before continuing to be on the right track in 2020 (4,457.60 VND) About its competitor, Song Hong company had a higher starting point at 7,764.89 VND A year after this trend remained peaking at 27 8,995.22 in 2019 before suddenly dropping by half in 2020 Although at the end of the period, the earnings per share of Thanh Cong was still lower than Song Hong, it was still a good sign that the company still developed substantially while its competitors experienced many waves 4.5.2 P/E ratio Thanh Cong Song Hong 2018 3.64 5.28 2019 4.17 4.92 2020 10.16 8.57 Unit: times The price-to-equity ratio measures the amount of money the investors are willing to pay for that stock 𝑃𝐸 = 𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝑡𝑖𝑚𝑒𝑠) 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 Comparing Thanh Cong with Song Hong, from 2018 to 2019 the ratio of these two companies moved in different ways In 2018, Thanh Cong shares sold for 3.64 times earnings, and then after one year, it increased to 4.17 times while Song Hong witnessed a slight reduction (5.28 to 4.29 times) Nonetheless, in 2020, both companies tremendously grew Song Hong doubled its figure of the previous year reaching 8.57 times It was more surprising that this ratio of Thanh Cong company steadily rose and surpassed its competitors peaking at 10.16 at the end of 2020 It was indicated that the quantity of investors who started to pay attention to Thanh Cong company rapidly increased in the year 4.5.3 Market-to-book ratio Thanh Cong Song Hong 2018 0.74 2.09 2019 0.63 1.79 28 2020 1.71 1.38 The market-to-book ratio is used to compare a company's current market value to its book value in financial valuation When the market-to-book ratio is lower than 1, it means that the company’s stock is undervalued In this case, the company performance is not quite good so this stock will be considered as a bad investment (Kelton, 2021) Otherwise, it is good for the company to have this ratio higher than This will persuade the investors to buy our stocks 𝑀𝑎𝑟𝑘𝑒𝑡 − 𝑡𝑜 − 𝑏𝑜𝑜𝑘 𝑟𝑎𝑡𝑖𝑜 = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 (𝑡𝑖𝑚𝑒𝑠) 𝐵𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 The situation was not very good for Thanh Cong company at the beginning of the period, in two years 2018 and 2019 This company was always undervalued and even expected a downward trend (0.74 and 0.63 respectively) The trend was also the same for Song Hong company in that period, its ratio decreased from 2.09 to 1.79 times However, in 2020 while Song Hong continued its downward movement reaching the bottom at 1.38, Thanh Cong company moved to a different path Thanh Cong’s market-to-book ratio rose very quickly and outshone its competitors at 1.71 To sum up, although Thanh Cong seems to be undervalued at the beginning of the period, in the end, it startlingly developed and passed its opponent proving its promising growth future 29 CONCLUSION In comparison to its competitors, Thanh Cong is a firm with steady financial development It has greater future potential than Song Hong due to its stable growth while the ratios of its competitor negatively fluctuated over the last few years This will be an ideal opportunity for Thanh Cong to develop and earn more market shares with its presented ability Although it has had to overcome several difficult conditions such as dealing with Covid-19 from 2018 until now, its earnings were initially lower, but they are now progressively improving, which is beneficial for their own On the other hand, regarding its efficiency in collecting receivables and debts from customers, the firm maintained its efficiency ratios in quite a stable condition Whereas there was a positive sign in Thanh Cong's long-run ability to meet its financial leverage as compared to its competitor because of its cooperation with Juki Singapore Group to expand its own production capacity and increase productivity through operational analysis from Juki software to remove redundant operations and speed up finishing products on the sewing line Finally, via Thanh Cong's ROE and market value ratios within years, although could be considered as operating less effectively, however it was expected that having more prospective growth and profitability in the future than its competitor, which also it demonstrated more stability in its operation as a business, even during the crisis caused by Covid-19 pandemic 30 REFERENCES Annual report 2021 (2021) ThanhCong https://thanhcong.demo10.maytech.vn/wpcontent/uploads/2021/04/Annual_report_2021_eng.pdf BSC Securities (2021a) BÁO CÁO NGÀNH DỆT MAY 2021 Retrieved from https://www.bsc.com.vn/Report/ReportFile/2738477 BSC Securities (2021b, May 13) Báo cáo danh nghiệp lần đầu ngành dệt may Retrieved November 29, 2021, from https://www.bsc.com.vn/Report/ReportFile/2738590 Cơ T (2019, November 7) Hệ số vịng quay khoản phải thu (Receivable turnover ratio) gì? vietnambiz https://vietnambiz.vn/he-so-vong-quay-khoan-phai-thu-receivable-turnover-ratio-la-gi20191107143532182.htm Dệt may Thành Công ghi nhận doanh thu 13,5 triệu USD tháng 6/2021 (2021, November 28) baodautu https://baodautu.vn/det-may-thanh-cong-ghi-nhan-doanh-thu-hon-135-trieu-usd-trong-thang62021-d147374.html Dự án TC – Thành Công Group (2021c) ThanhCong https://www.thanhcong.com.vn/vi/du-an-tc-1/ Editor NTV (2021d, April 15) Chủ tịch Hội đồng quản trị gì? Giấy phép kinh doanh https://giayphepkinhdoanh.vn/chu-tich-hoi-dong-quan-tri-la-gi/ Fernando, J (2021, October 13) Earnings Per Share (EPS) Investopedia https://www.investopedia.com/terms/e/eps.asp Giới thiệu chung – Thành Công Group (2021f) ThanhCong https://www.thanhcong.com.vn/vi/gioithieu-chung/ 31 GIỚI THIỆU CÔNG TY SÔNG HỒNG (2021g) Song Hong https://www.songhong.vn/gioi-thieu-congty-song-hong Kelton, W (2021h) Book-to-Market Ratio Definition Investopedia https://www.investopedia.com/terms/b/booktomarketratio.asp Lan M (2019, November 4) Thời gian thu hồi tiền hàng tồn đọng (Days Sales Outstanding - DSO) gì? vietnambiz https://vietnambiz.vn/thoi-gian-thu-hoi-tien-hang-ton-dong-days-sales-outstanding-dso-la-gi20191104163422848.htm Lịch sử hình thành – Thành Công Group (2021i) ThanhCong https://www.thanhcong.com.vn/vi/lich-suhinh-thanh/ Ngành may – Thành Công Group (2021j) ThanhCong https://www.thanhcong.com.vn/vi/nganh-may/# Ngành may – Thành Công Group (2021k) ThanhCong https://www.thanhcong.com.vn/vi/nganh-may/ P (2021l, November 23) Inventory turnover gì? Ý nghĩa Inventory turnover An Khang Real https://ankhangreal.vn/inventory-turnover-la-gi/ Quan He Co Dong (2021) Song Hong https://www.songhong.vn/Quan-he-co-dong-106 V (2021m) TCM: CTCP Dệt may - Đầu tư - Thương mại Thành Công - TCG VietstockFinance https://finance.vietstock.vn/TCM-ctcp-det-may-dau-tu-thuong-mai-thanh-cong.htm Vy H (2020, March 25) Thời gian lí hàng tồn (Days Sales of Inventory - DSI) gì? vietnambiz https://vietnambiz.vn/thoi-gian-thanh-li-hang-ton-days-sales-of-inventory-dsi-la-gi-dac-diem20200323231515582.htm Link video oral presentation: https://youtu.be/C3bfcAnjASI 32 ... INTRODUCTION Company name: Thanh Cong Textile - Investment - Trading Joint Stock Company (TCG) Telephone: (+84)3815.3962 - (+84)3815.3968 Email: tcm@thanhcong.com.vn Address: 36 Tay Thanh, Tay Thanh. .. thành – Thành Cơng Group (2021i) ThanhCong https://www.thanhcong.com.vn/vi/lich-suhinh -thanh/ Ngành may – Thành Công Group (2021j) ThanhCong https://www.thanhcong.com.vn/vi/nganh-may/# Ngành may –. .. The company' s independent (external) audit firm Thanh Cong? ??s audit firm in 2018 and 2019 was Deloitte However, in 2020, it collaborated with PWC Thanh Cong company was officially listed on the stock