(Luận văn HV chính sách và phát triển) valuation and some recommendations for PINACO JSC stakeholders

LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com PREFACE Vietnam's economy has been recovering strongly in recent years, creating favorable conditions for the stock market to develop However, the size of the market is still relatively small and there is a lot of potential for a future boom In order to create a healthy competitive market, specialized analytical studies are required, especially studies on market volatility, changes in business lines, price fluctuations of the stock, the risks of investors when entering the stock market Recognizing this, I decided to choose the “ALTERNATIVE subject: METHOD TO DETERMINING INTRINSIC VALUE: THE CASE OF PINACO – DRY CELL AND STORAGE BATTERY COPORATION” PAC shares are one of the stocks that have received a lot of market attention, including individuals and organizations However, there are still not many in-depth reports from financial institutions, besides the information about PAC still asymmetric information phenomenon in the market So, I make this report with the aim of providing the most objective, unbiased information about the PAC stock code combined with the investment advice of the clients of the internship-company and small investors in the market In addition, the report also shows a part of the process of securities investment analysis and securities dealing at the company, thereby helping the company to perfect these processes The content of this report mainly focused on analyzing performance of PINACO over years, combine with the fluctuation of macroeconomic and industry, so that can release assumptions to build a pricing model for PINACO stock and give results at last The report also consults information and calculation of the other pricing report of securities companies to have an objectivity look about PINACO stock I have tried to be extremely meticulous in preparing this report despite the various limitations faced as very limited information about surgical industry LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Objectives of the study and research question Research on a number of theoretical issues on company value and valuation, methods of company valuation and application of those methods to valuation of PINACO JSC It then draws on the experience of the analysis and valuation to be able to properly value the value of the business Suggest solutions to perfect valuation methods that are close to the value of the business Witch those objectives, the research question of thesis is: “Identify the fair value of PINACO JSC” Subjects of study scope The thesis focuses mainly on the application of valuation methods to PINACO Joint Stock Company, which originated from the research of business activities of the company from 2015 – 2019, with the company's future plans to assess its financial position and determine its value through future cash flow projections and comparisons with other peers Research Methodology To clarify the research topic, the thesis mainly uses the following methods: comparison method, synthesis method, descriptive method, analytical method, predictive method The analysis will follow the general theories of enterprise analysis and valuation Detailed of methods applied will be presented in Chapter Structure of the thesis In addition to the table of contents, preamble, conclusion, list of references and annex tables, the thesis consists of three chapters: Chapter 1: Literature review Chapter 2: PINACO financial analysis LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 3: Valuation and some recommendations for PINACO JSC stakeholders LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: LITERATURE REVIEW Definitions 1.1 Stock A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation This entitles the owner of the stock to a proportion of the corporation's assets and profits equal to how much stock they own Units of stock are called "shares" Stocks are bought and sold predominantly on stock exchanges, though there can be private sales as well, and are the foundation of many individual investors' portfolios These transactions have to conform to government regulations which are meant to protect investors from fraudulent practices (Investopedia, 2020) Stock is a type of securities, issued in the form of a certificate, or book entry, confirming the lawful rights and interests of investors when engaging in business activities of the enterprise The stockholder becomes a shareholder and at the same time they become the owner of the issuing company Some stocks are paid monthly, quarterly or annual dividends In Vietnam stock market, a stock represents 10,000 dong of charter capital of enterprises There are two common types of stocks: common stock and preferred stock Shareholders owning common stock are often allowed to freely transfer and vote on the company's decisions at the General Meeting of Shareholders, to receive dividends according to the business results and the value of the shares they are holding In contrast, the shareholders holding preferred stock have limited powers and responsibilities such as: fixed income, no right to vote or stand for election However, shareholders who own preferred stock always receive the dividend at first, and when the company goes bankrupt, they are also the ones paid by the company before the others LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1.2 Stock market A stock market is a collection of people who buy and sell stocks (or securities), which represent their ownership of a company; they may include stocks listed on a public stock exchange, or shares publicly traded, such as shares of a private company are sold to investors through community fundraising platforms The investments in the stock market are mostly made through stock brokers and online trading platforms (Hayes, 2020) In the stock market, there are many large companies listing their shares on a certain stock exchange This makes their stocks more liquid and thus attracts more investors The exchange also acts as a guarantor for the trading Other stocks can be traded "over the counter" (OTC), meaning through agents Some big enough companies even list their stocks at more than one exchange in different countries to attract investment from abroad There are three biggest securities trading markets in Vietnam today include: HNX, HOSE, UPCoM and OTC decentralized stock market 1.3 Business analysis Business analysis is a research process to assess the entire business operations of the enterprise in order to clarify the quality of business operations: influential causes, potential resources should be exploited Therefore, proposing measures to improve business efficiency in the enterprise There are some main roles of business analysis:  It is a tool to detect potentials; improve management regulations in business  The basis for making the right decision in the functions of managing, inspecting, evaluating and operating business activities Allowing businesses to recognize properly their capabilities, strengths and limitations to identify the right business objectives and strategies  An important measure to prevent risks  Through analyzing the business activities of external entities, enterprises have made the right decision in cooperating with enterprises LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1.4 Valuation In finance, valuation is the process of estimating the present value (PV) of an asset Valuations can be done on assets (for instance, investments in marketable securities such as stocks, options, business enterprises, or intangible assets such as patents and trademarks) or on liabilities (e.g., bonds issued by a company) There are many reasons are needed for valuation such as investment analysis, merger and acquisition transactions, capital budgeting, financial reporting, taxable events to find out the proper tax liability, and in litigation Valuation models: are models created by investment analysts for the purpose of determining the value of financial assets These models have inputs that are collected from available information sources about assets such as financial reports, information on similar products, market movements, and so on Then, this information is processed through calculations and analysis combined with the subjective judgment of the user model, and then the output is the intrinsic value of the financial asset 1.5 Intrinsic value The intrinsic value can be interpreted as the true value of a security, a company, real estate or any kind of asset, which is different from the market value or book value of those assets It could be calculated or perceived by using fundamental analysis, including both tangible and intangible factors Intangible elements such as brand, trademark, copyright, etc., which are difficult to quantify, sometimes not accurately reflected in market prices, so the intrinsic value may or may not be the same as the current market value Intrinsic value is ordinarily calculated by summing the discounted future income generated by the asset to obtain the present value (Bodie, 2013) Intrinsic value exists objectively, no one can impose it, even its owner The objective value of intrinsic value is the total value of tangible and intangible assets that are working at the issuing organization Therefore, intrinsic value also reflects LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com the potential of businesses and is the economic basis of market prices Market prices are always volatile, but often revolve around intrinsic value, cannot escape too far, too long intrinsic value Factors affect the intrinsic value: - Business results If the business is profitable, a percentage of the profits is reinvested, the tangible assets will increase, the intrinsic value will rise accordingly On the other hand, if a loss happens, the tangible asset will fall, and the intrinsic value will decrease These increases and decreases are the consequence of changes in assets, owners' equity in the books of account and financial statements - The formation of intangible assets (trademarks, patents, inventions, human resources, prestige of enterprises ) This element appears in the form of business, but is difficult to calculate in cash as a tangible asset Thus, it is often not reported or reflected incorrectly in the financial statements However, it has a very strong impact on business results Main methods to analyze company Company analysis is a process that includes analysis of the company's financial situation, products, services, and competitive strategy (the company's plan to deal with threats and opportunities from external environment) This analysis takes place after the analyst understands the external environmental impact on the company, macroeconomics, demographics, government, technology and society affecting the competitive structure of the industry Present accurate and specific results: The analysis of a company, whether by topdown or bottom-up, is intended to determine the investment opportunity However, if only based on the indicators in the reports, investors can hardly make the most accurate decision Company valuation is an option that summarizes the company analysis process, providing the most practical basis for comparison in investor decision-making LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2.1 Comparative method The comparative method of enterprise financial analysis is quite popular and widely used not only in financial analysis but also in the field of economic analysis The comparison aims to highlight the differences and characteristics of each business Through this it is possible to find out trends and laws of market fluctuations Entities, individuals or groups can rely on it to make the right choice Briefly, by comparing two or more things you have a scope of discovering something unknown about either one of the products which are compared Based on that, the types of the comparative method including:  Relative comparisons: Managers will understand the relationship, structure, fluctuation trends, growth rates as well as the laws of fluctuations of economic indicators There are several types of relative figure that are often used by financial analysts  Absolute comparison: This method of comparison reflects the size of the research criterias, financial analysts can clearly see the fluctuation in the size of the mid-term research criteria with the original Advantages of comparative method: - Comparative method is widely used in many countries around the world when there are the differences in core values, dimensions, products of the company, etc This method does not have a fixed model or formula, but based on the information market to analyze the business - This method illustrates an appreciation of market value, hence having a solid basis for being recognized by customer and recognized by legal authorities as well - It is the basis for many other valuation methods The analyst often uses a direct comparison method in combination with other methods to determine the company’s position in the market LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Disadvantages of comparative method: - Having more accurate information is essential If the market information is not correct, comparative method cannot be used - The parameters of the company fluctuate daily lead to analysis results will be wrong if the information is not updated in time Hence, in the context of market fluctuations the information becomes obsolete quickly in a short time - Only can use this method with the competitors or companies which have same product line - Analyst must have extensive experience in market knowledge That is, the analyst must identify and analyze the strengths and weaknesses of the documents collected and used in the comparative analysis - There is some amount of cost to make the updated information 2.2 Financial statement analysis This method is widely used in financial analysis as it is based on the normative significance of financial ratios in financial relations Percentage method enables analysts to efficiently exploit the data and systematically analyze the types of rates in a continuous time series or in stages Through that, economic and financial information is improved and more fully provided This enables data accumulation and accelerates the calculation of a series of ratios such as: - Solvency ratio: Used to assess the ability of enterprises to meet short-term debts - Proportion and ability to balance capital, capital structure and source of capital: This indicator reflects the level of stability and financial autonomy - Proportion of business operation capacity: This is a group of indicators specific to the use of resources of enterprises - Proportion of profitability: reflecting the overall efficiency of production and business of the enterprise 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4.4.3 Leverage ratios Long term debt ratio (D/A) Unit: Million VND Long- term liabilities Total assets Long- term Debt ratio (%) 2015 2016 2017 2018 2019 4,123 820 1,734 49,380 78,626 1,264,214 1,695,179 1,780,652 2,272,811 2,482,744 0.33 0.05 0.10 2.17 3.17 (Source: Calculated from PAC’s financial report) 3,000,000 3.5 2,500,000 2.5 2,000,000 1,500,000 1.5 1,000,000 500,000 0.5 0 2015 2016 Long- term liabilities 2017 Total assets 2018 2019 Long term Debt ratio (D/A) (%) Figure 17 - Long-term debt ratio of PAC from 2015 to 2019 Long term debt to total asset ratio is the ratio that represents the financial position of the company and the company’s ability to meet all its financial requirements The figure for that ratio decreased slightly between 2015 and 2017 from 0.33% to 0.10% After that, it increased sharply and reached 3.17 in2019 The reason for that was total assets increased significantly and long- term liabilities increased as well 49 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com The time interest earned ratio (TIE) Unit: Million VND 2015 130,541 9,590 13.61 EBIT Interest expenses TIE (Times) 2016 294,395 13,710 21.47 2017 199,275 24,411 8.16 2018 240,968 43,634 5.52 2019 270,836 58,855 4.60 (Source: Calculated from PAC’s financial report) 350,000 25 300,000 20 250,000 15 200,000 150,000 10 100,000 50,000 0 2015 2016 EBIT 2017 Interest expenses 2018 2019 TIE (Times) Figure 18 - The time interest earned ratio of PAC from 2015 to 2019 The times interest earned (TIE) ratio is a measure of a company's ability to meet its debt obligations based on its current income TIE ratio increased and peaked at 21.47 in 2016 After that, this figure decreased dramatic during 2016 to 2019 The reason was that the earnings before interest tax increased slowly, and interest expense went up sharply between 2015 and 2019, from13710 to 58855 billion VND 50 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Earning before interest tax (EBIT) Unit: Million VND 2015 6.17 EBIT Margin (Times) 2016 12.54 2017 7.63 2018 8.13 2019 9.20 (Source: Calculated from PAC’s financial report) 14 12 10 2015 2016 2017 2018 2019 Figure 19 - Earnings before interest and taxes of PAC from 2015 to 2019 The earnings before interest and taxes is measure of a firm’s profit that includes all income and expenses except interest expenses and income tax expenses EBIT ratio increased dramatically from 2015 to 2016 and peaked at 12.54 in 2016 After that this figure decreased slightly from 2016 to 2017, from 12.54 to 1.73 During the last period 2017 to 2019, this ratio increased slightly 51 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4.4.4 Profitability ratios Profit Margin Unit: Million VND 2015 2016 2017 2018 2019 Net income 90,476 223,286 135,807 157,903 166,695 Sale revenue 2,260,210 2,537,380 2,863,558 3,273,583 3,541,175 Profit Margin (Times) 4.00 8.80 4.74 4.82 4.85 (Source: Calculated from PAC’s financial report) 4,000,000 10 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2015 2016 Net income 2017 Sale revenue 2018 2019 Profit Margin (Times) Figure 20 - Profit margin of PAC from 2015 to 2019 From 2015 to 2016 profit margin rose and peaked at 8.8 in 2016 The reason for that was the net income and sale revenue increased sharply at that time After that this figure for profit margin decreased to 4.74 in 20197 and then kept remaining stable during the period 2018 to 2019 52 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Basic earning power (BEP) Unit: Million VND 2015 2016 2017 2018 2019 130,541 294,395 199,275 240,968 270,836 1,264,214 1,695,179 1,780,652 2,272,811 2,482,744 10.32 17.37 11.19 10.60 10.91 EBIT Total assets BEP (%) (Source: Calculated from PAC’s financial report) 3,000,000 20 18 2,500,000 16 14 2,000,000 12 1,500,000 10 1,000,000 500,000 0 2015 2016 EBIT 2017 Total assets 2018 2019 BEP (EBIT/total assets) (%) Figure 21 - Basic earning power ratio of PAC from 2015 to 2019 Basic earning power (BEP) ratio is a measure that calculates the earning power of a business before the effect of the business' income taxes and its financial leverage From 2015 to 2016 the figure for BEP increased and peaked at 17.37 in the year 2016 After that period this figure decreased to 11.19 in 2017 and then remained stable until the year 2019 53 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Return on assets (ROA) Unit: Million VND Net income Total assets ROA (Times) 2015 2016 2017 2018 2019 90,476 223,286 135,807 157,903 166,695 1,264,214 1,695,179 1,780,652 2,272,811 2,482,744 7.19 15.09 7.81 7.79 7.01 (Source: Calculated from PAC’s financial report) 3,000,000 16 14 2,500,000 12 2,000,000 10 1,500,000 1,000,000 500,000 0 2015 2016 Net income 2017 Total assets 2018 2019 ROA (Times) Figure 22 - Return on asset ratio of PAC from 2015 to 2019 In 2015, 100 VND of assets generated 7.19 VND of net income This figure increased dramatically and peaked at 15.09 in 2016 The reason for that was the increase of net income was faster than total assets After that there was a sharp decrease in 2017 to 1.81 Until the last period this figure kept decreased slightly 54 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Return on equity (ROE) Unit: Million VND 2015 2016 2017 2018 2019 90,476 223,286 135,807 157,903 166,695 506,110 668,555 670,259 599,762 668,439 17.78 38.02 20.29 24.87 26.29 Net income Owner’s equity ROE (Times) (Source: Calculated from PAC’s financial report) 800,000 40 700,000 35 600,000 30 500,000 25 400,000 20 300,000 15 200,000 10 100,000 0 2015 2016 Net income 2017 Owner’s equity 2018 2019 ROE (Times) Figure 23 - Return on equity of PAC from 2015 to 2019 In 2015, for every 100 VND of equity generated 17.78 VND of profit, compared to 2016 this figure increased by 20.24 VND The reason for that was that in 2016, the growth rate of equity was higher than the growth rate of net income After that, the profitability on equity of businesses was increased from 2017 to 2019 55 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 4.4.5 Valuation ratios 2015 10.56 2.04 3,154 PE (Times) PB (Times) EPS (VND) 2016 2017 5.52 16.61 2.29 3.37 5,958 2,922 2018 11.40 3.00 3,398 2019 6.97 1.74 3,587 (Source: Calculated from PAC’s financial report) 18.00 7000 16.00 6000 14.00 5000 12.00 10.00 4000 8.00 3000 6.00 2000 4.00 1000 2.00 0.00 2015 2016 EPS (VND) 2017 2018 PE (Times) PB (Times) 2019 Figure 24 - Valuation ratio of PAC from 2015 to 2019 The company’s P/E fluctuated around 0.6 during the period 2015 to 2019 In 2017 investors are willing to spend 16.61 dong to get VND profit from this stock The decreased in P/E also showed the not much good evaluation of investors on the shares of PAC How the market’s expectation is Earnings per share or EPS is an important financial measure, which indicates the profitability of a company EPS increased between 2017 and 2019, from 2922 to 3587 Before that in 2017, this figure peaked at 5958 56 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 3: ESTIMATION AND SOME RECOMMENDATIONS FOR PINACO JSC STAKEHOLDERS Estimate and valuation 1.1 DCF Valuation: Free Cash Flow to Equity (FCFE) I used FCFE methods to estimate the value of PAC stock during 2015 and 2024 which is forecast PAC’s stock price in the year 2020 based on assumptions below: - Near futures are the same as recent year - Assets and spontaneous liabilities grow as the same rate as sales - Profit margins: constant - Capital structure: not change - Dividend policy: not change - Note payable, long-term debt and equity: constant - Growth rate: 6.5% (following the prediction of Worldbank) Unit: Million VND Table - Forecast free cash flow to equity of PAC 2015 Net income 2016 2017 2018 2019 2020 2021 2022 2023 2024 90476 223286 135807 157903 166695 154833 167705 156589 160745 161313 Dep 65945 64060 75887 87101 86203 75839 77818 80570 81506 80387 Net WC 136588 234919 -53065 -64580 Capex 19575 93297 119907 178332 36748 58122 42429 3931 15330 31312 96232 101469 117847 122757 123327 112327 Net borrowings -66224 130706 154908 502198 115934 167504 214250 230959 246169 194963 FCFE -65966 89836 299760 633450 235852 238586 299497 341429 349763 293025 (Source: Calculated from PAC’s financial report) The FCFE of PAC increased from 2015 to 2018 and then decreased in 2019 (the figure for 2019 was 235852 million VND), it might be because at that time the PAC company reduced amount of cash for investing to expand the size of company (capex is 96232 million VND) 57 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Table - Capital asset pricing model CAPM Rm 6.89% (Vn-index) Rf 6.30% (5-year Vietnam government bond interest) beta 1.72 Cost of equity 7.31% g 5.00% (Is calculated by using historical price) (following the worldbank prediction 2020) (Source: Calculated by author) Unit: Million VND Table - Present value 2020 2021 2022 2023 2024 PV (FCFEi) 158273 185619 196599 185756 140601 (Source: Calculated by author) We have the market return rate is 6.89% (based on the return of VN-index), riskfree rate equal 6.3% (based on 5-year Vietnam government bond interest), beta is 1.72 (is calculated above) Hence, the cost of equity follows the CAPM formula: E(R) = Rf + β(Rm−Rf) is 7.26% Table - PAC's stock price Equity value 8967522 Terminate value 8100672 No of out.share 464.717 Stock price 20067.114 (Source: Calculated by author) Finally, the stock price in 2020 would be 20067 VND 58 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1.2 Dividend Discount Model Revenue growth is expected to grow slowly in 2020 with the following assumptions:  Automobile battery output will grow at the same rate as that of used cars (10%), based on the fact that Pinaco & GS represent 80% of industry output In recent years their businesses also retain leader in market share industry  Motorcycle battery production is still growing because of replacement demand, but only at 0.9% - roughly equal to population growth  Sub-sectors: Output of flat batteries (saturation) and production of consumer batteries decreased  Gross margin: Stay at 15% with conservative basis Table - Dividend discount model for PAC Dividend Discount Model Dividend Discount Model Required return Earnings growth PV (dividend) PV (Terminal value) Value 1500 15% 1500 15% 2000 15% 2000 15% 2000 15% 1304 1512 1315 1144 994 Terminal 15% 3% 8535 14804 (Source: Calculated by author) 1.3 Relative Valuation I choose peers group based on the similar characteristics with PAC in terms of product lines and financial performance In Vietnam, GS Yuasa is the biggest competitor of PAC but it is not listed on the Vietnamese securities market yet Thus, I consider GS Yuasa as the only domestic peer For better comparison, I select three foreign peers in Asia to compare with PAC because of the same regional characteristics Valuation using Forward P/E: P/E reflects the direct relationship between price and EPS 59 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Table - Target price for PAC (Comparative method) Relative Valuation EPS Forward P/E 3594 7.0x 25158 Fair value (Source: Calculated by author) Table - Compare Pinaco with some other companies Unit: Billion VND Comapany Country Sebang global battery Co.LTD Furukawa battery Co LTD Yuasa battery PLC Average Dry cells and Shortage battery PAC Capitalization Revenue (2019) Korea 13,591 24,058 Japan 4,782 Thailand Vietnam NPAT (2019) NPAT/Revenue (2019) ROE (x) D/E (x) P/E (x) 1,985.4 8.2 10.3 0.14 9.3 12,519 438.8 35.0 9.7 0.45 16.4 1,222 1,744 92.7 5.2 20.6 0.01 12.4 1,766 2,965 157.9 5.3 22.1 2.2 12.7 12.3 (Source: FPT Securities) From three foreign peers, I have the median forward PE equal to 12.7 and 5.98 The domestic peer (GS Yuasa) exposes forward PE of 6.77 Then, to evaluate PAC’s ratios, I use average between domestic peer and median foreign peers The result for forward PAC’s PE equal to 6.77 and 1.71 This number are smaller than GS Yuasa and of this firm at the moment But in the future, the trend of PAC will decrease to balance with the Vietnam and the area battery industry From my prediction, the target price from Multiples valuation is VND 25158 60 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1.4 Weighting of the models Both DCF & multiples pricing are importance because each method has different strengths Therefore, I assign weight for DCF with 50%, multiples with 50% and reach the target price of VND 20,009 Table - Weighting of the models Price (VND) Weight FCFE 20,067 33.33% DDM 14,804 33.33% Forward PE 25,158 33.33% Target price 20,009 (Source: Calculated by author) Limitations and room for further research The success of using the discounted cash flow model depends on the information element Vietnam stock market is a low-efficiency market, asymmetric information should often occur the phenomenon of different subjects have different sources of information and give different results When I made this report, I approached the company as a small investor, so it was impossible to get the most accurate and close-to-company data The results of the company's growth forecasts are calculated on the basis of actual and audited data, combined with the consultation of some experts, but the data are based on historical data, and whether the opinions are profoundly subjective Therefore, there are many risks of forecast difference Another factor that can be considered here is that the Rm (also known as market margin) is also a volatile factor The large number of listed stocks such as VRE, VJC, HVN, etc, together with large trading volume, made Rm change continuously, affecting the results of the CAPM model In addition, the Beta also fluctuate much because PAC has a lot of activities that cause the stock price fluctuate 61 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com The valuation by comparable method is only effective when the company's valuation is comparable to that of similar companies with similar growth rates and growth rates Vietnam's stock market is still small and the number of listed companies is still not large In case of Pinaco, it is dominating firm in Vietnam battery market so it doesn’t have a competitor which has the same size or financial structure in the same industry, so it is really hard to have a good comparison with a domestic firm in domestic market In addition, information errors in the synthesis of sector information due to lack of a unified regulation on the division of occupations also hinders the valuation These subjective reasons have contributed to distorting the real value of the business, making it difficult to use the valuation by comparable method Recommendation 3.1 Company - Fluctuations in prices of lead and zinc main raw materials will have a direct impact on PAC's gross profit margin It is estimated that the 10% increase in the average price of zinc lead will reduce the gross profit margin by 6.8% - The efficiency of expansion, upgrading of machinery and technology helps PAC to improve its competitiveness and keep up with new consumer trends - Reduce amount of debt cause the interest rate fluctuation risk: As of March 31, 2019, PAC's interested bearing debt is VND1,190 billion, it is estimated that if the interest rate increases by 1%, the EBT will drop by about VND11.9 billion 3.2 Investor Pinaco Company is an enterprise that owns 40% of the automobile battery market, gain the benefit from the annual growth rate of 10% of cars, meanwhile the average number of cars per 1000 people in Vietnam is lower than other countries in same region The number of motorcycles circulating nearly 40 million units The average 62 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com battery life is years Therefore, it is shown that the growth momentum of the industry will continue to maintain double-digit growth for at least the next years In early 2020, Pinaco was also significantly affected when the Covid-19 epidemic occurred Enterprises have implemented many sales policies, the exchange rate losses due to the strong USD have affected PAC's profits However, the exchange rate has tended to stabilize because Vietnam government controlled the epidemic well The price of lead and zinc raw materials maintained at low levels in 2020 will help PAC's gross profit margin improve in this the year I use the Dividend Discount (DDM) method to value the business, the risk of valuation is the sharp fluctuations of lead prices and exchange rates that may affect Pinaco's profit and cash flow Therefore, on a prudent perspective, I have achieved a target price of VND 20,009 per share 63 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ... on company value and valuation, methods of company valuation and application of those methods to valuation of PINACO JSC It then draws on the experience of the analysis and valuation to be able... Literature review Chapter 2: PINACO financial analysis LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 3: Valuation and some recommendations for PINACO JSC stakeholders LUAN VAN CHAT... importing and exporting battery products, batteries and supplies, equipment for battery and battery production and trading 1.4 Main product The products of PINACO have achieved leading quality standards