2 Table of Contents INTRODUCTION 4 Chapter 1 BUSINESS ENVIRONMENT OVERVIEW AND ANALYSIS of HAU GIANG PHARMACEUTICAL JOINT STOCK COMPANY 6 1 1 About company 6 1 1 1 Formation History 6 1 1 2 Business f.
Table of Contents INTRODUCTION Chapter 1: BUSINESS ENVIRONMENT OVERVIEW AND ANALYSIS of HAU GIANG PHARMACEUTICAL JOINT STOCK COMPANY 1.1 About company: 1.1.1 Formation History 1.1.2 Business fields and achievements 1.1.3 Vision, mission, and core values 1.1.4 Goals and development strategy 1.2 Analysis of the competitive environment of DHG Pharma 1.2.1 Current Competitors 1.2.2 Potential competition risk 1.2.3 Supplier pressure 1.2.4 Customer pressure 1.2.5 Alternative products 10 1.2.3 Analysis of the internal environment of DHG Pharmaceutical Joint Stock Company 10 Chapter 2: FINANCIAL ANALYSIS AND VALUATION OF JOINT STOCK COMPANY DHG PHARMACO (DHG) 11 2.1 DHG's cost of capital 11 2.1.1 Capital structure of company 11 2.1.2 Interest expense 11 2.1.3 Corporate income tax rate 12 2.1.4 Weighted average cost of capital (WACC) 12 2.2 The free cash flow of DHG Pharma 14 2.2.1 Profits from business activities 14 2.2.2 Return on capital 14 2.2.3 Reinvestment rate 15 2.2.4 Two-stage growth model 15 Chapter 3: Prediction of the company's future growth rate 17 3.1 Basis for forecasting growth rate of DHG in the coming years 17 3.2 Equity value 18 3.3: DHG Pharma's stock price movement 18 3.4 Commenting on the growth rate of DHG in the future: 19 3.5 COMMENTS, ASSESSMENTS AND RECOMMENDATIONS FOR INVESTORS 20 CONCLUSION 21 REFERENCE 22 GROUP MEMBERS 23 INTRODUCTION About the topic Despite going through a difficult period, at present, Vietnam's economy has prospered and recovered However, the effects of the global recession and economic crisis have not completely ended Consumer's capacity can cause the decline in consumption that affects the demand for goods, but for the pharmaceutical industry, this challenge becomes an advantage of the industry, compared to other business fields In difficult times, Vietnamese consumers still cannot cut down on the need to use drugs to prevent diseases The pharmaceutical industry is one of the sectors that the Government is particularly interested in and has enjoyed strong growth And Hau Giang Pharmaceutical Joint Stock Company is currently the leading company in the industry DHG stock is considered a good stock with a relatively sustainable growth rate and attracts the attention of many investors in the market However, with the limitations of the current stock market such as not transparent information, intentionally falsified information, and the price does not accurately reflect the intrinsic value of the stock, which has led to concerns in investor decisions In the face of such difficulties, investors need expert analysis to help orient their investments and accurately assess the value of the stocks they are interested in From the perspective of an investor today, plus the desire to learn more about the above field, we choose the topic: "Analysis and valuation of Hau Pharmaceutical Joint Stock Company" to provide his analysis and judgment on the value of DHG Pharmaceutical Joint Stock Company as well as the current market price movement of DHG's stock Analysis process Research objectives and requirements - Systematize theories of financial asset valuation and analysis - Learn the overview of the pharmaceutical industry in general, development trends in the world market, overview of Vietnam's pharmaceutical industry and competitive trends - Learn about Hau Giang Pharmaceutical Joint Stock Company - Collect financial indicators, business results reports and developments of DHG stock price for DHG stock analysis and valuation - Compare DHG's indicators with industry norms and find out DHG's position in the pharmaceutical industry - Based on the results of analysis, make recommendations, recommendations, and policies future development of DHG, forecast the growth rate of DHG stock in the future next time Object and scope of the study - Subjects: Hau Giang Joint Stock Company (DHG) - Research scope: study financial indicators, stock price movements DHG on the stock market Research Methods: Discounted cash flow method Expected data - Share price of DHG - Financial statements: balance sheet, cash flow statement, statement business results of DHG - Financial indicators of DHG - Annual Report 2021 Chapter 1: BUSINESS ENVIRONMENT OVERVIEW AND ANALYSIS of HAU GIANG PHARMACEUTICAL JOINT STOCK COMPANY 1.1 About company: Company name: DHG Pharmaceutical Joint-Stock Company Abbreviation: DHG PHARMA Headquarters: 288 Bis Nguyen Van Cu, An Hoa Ward, Ninh Kieu District, Cantho City Tel: (0292) 3891433 – 3890802 – 3890074 Fax: 0292.3895209 Email: dhgpharma@dhgpharma.com.vn Website: http://www.dhgpharma.com.vn Tax Number: 1800156801 1.1.1 Formation History Establishment: Precursor of DHG Pharma was 2/9 Pharmaceutical Factory and was founded on September 02nd 1974 at Kenh Dat Set, Khanh Lam Commune (Khanh Hoa Commune now), U Minh District, Ca Mau Province Equitization: On 02 September 1974, the Company was changed into a Joint-stock Company with the initial charter capital was 80 billion VND “DHG” being listed on HOSE: December 21st, 2006, 8,000,000 shares of DHG Pharma posted on Ho Chi Minh Stock Exchange (HOSE) under the securities code DHG Milestones - 1996: The first year that DHG Pharma’s products was elected as “Vietnam High Quality Goods” by customers (15 years consecutive) The first year that the factories complied with the GMP standard The first year that DHG Pharma being the leader of Vietnam pharmaceutical industry until now - 2004: Equitization - 2006: “DHG” being listed on HOSE For more than 30 years of formation and development, DHG Pharma is now recognized as a leading company of Vietnam Pharmaceutical industry These are essential factors that help DHG Pharma have a steady position in the path of integration 1.1.2 Business fields and achievements Business areas Hau Giang Pharmaceutical Joint Stock Company mainly deals in main product groups including Pharmaceuticals, Functional Foods and Cosmetics In which, revenue of the pharmaceutical group always accounted for the highest proportion and remained stable for many years Next is the group of functional pharmaceuticals and finally the group of cosmetic pharmaceuticals accounting for the proportion of lowest weight Specifically, in 2014, the revenue of pharmaceutical group accounted for 93.56%; The group of functional foods accounted for 6.28% and the last group of cosmetics and pharmaceuticals accounted for 0.16% Honored titles - 1988: Third-class Labor Medal - 1993: Second-class Labor Medal - 1996: Hero of Labor (Period 1991 – 1995) - 1998: First-class Labor Medal - 2004: Third-class Independence Medal - 2010: Second-class Independence Medal - Top 50 best listed companies in Vietnam 2014 (9 years in a row) (Forbes) - Top 10 strong brands in Vietnam (6 years in a row) (awarded by Vietnam Economic Times) 1.1.3 Vision, mission, and core values Vision: “For a more beautiful and healthier life” Mission: “DHG Pharma always provides high quality products and services to satisfy the aspiration for a more beautiful and healthier life.” Core values: core values Quality, safety, and effectiveness targeted as our highest commitment Knowledge and creativity served as our foundation for development Responsibility, cooperation, and promotion prioritized in our motto action DHG Pharma identity features taken as our pride Mutual prosperity with partners established as our long-term goal Outstanding differentiation employed as our strength in competitions Benefits for the community centered upon at the start of all activities 1.1.4 Goals and development strategy Enhance brand value through increasing domestic market share, opening expand exports, exploit the advantages of the distribution system Maximize production capacity and efficiency, product quality Maximize the capacity and efficiency of corporate governance, financial management, managing the supply chain Expand investment cooperation towards diversification Good implementation of social and environmental responsibilities Good performance of responsibilities to employees 1.2 Analysis of the competitive environment of DHG Pharma 1.2.1 Current Competitors The pharmaceutical industry is one of the industries with a highly competitive internal environment Especially after our country joins the WTO, all products are subject to competition fierce competition Pharmaceuticals are special products, so the competition in the market Pharmaceuticals have always been very drastic and have received the attention of the whole society Currently, the three biggest competitors of DHG in terms of revenue and market capitalization are: Traphaco Joint Stock Company (TRA) is a company specializing in the production of traditional medicines with two lines Main products: Boganic (liver tonic) and Hoat Huyet Duong Brain (supplement brain) The competitive advantage of TRA is the supply of domestically produced raw materials (meeting 90% of the demand), while other traditional medicine manufacturing companies still must depend on the supply from China Domesco Medical Import-Export Joint Stock Company (DMC) has a diversified pharmaceutical portfolio, including traditional medicines, vitamins, functional foods, antibiotics, pain relievers and brand-name products The popular products of DMC in the market are generic drugs used to treat diabetes and cardiovascular diseases with prices 30% to 40% lower than imported drugs With modern technology, technology The company has successfully researched and is allowed to produce more than 406 items for domestic use and export Domesco's drug production materials are mainly imported from famous manufacturers of pharmaceutical ingredients in the world in Europe and the US, the quality of the raw materials is highly stable and certified DMF Particularly for raw materials derived from herbs, Domesco organizes purchasing at major domestic supply regions Imexpharm JSC (IMP) is currently the pharmaceutical company with the best technical and technological infrastructure in Vietnam The main products of IMP are high quality antibiotics belonging to the Cephalosporin and Penicillin groups Thanks to modern technology infrastructure, IMP is often chosen by multinational pharmaceutical corporations as the main processing unit in Vietnam for their products 1.2.2 Potential competition risk Currently, due to the specific characteristics of the pharmaceutical industry, the barriers are still high, a new enterprise that wants to participate in the production and distribution of drugs needs to meet high standards set by the state and the World Health Organization (WHO) fabricate According to Decision No 27/2007/QD-BYT of the Ministry of Health and the requirements of the World Health Organization, enterprises that want to produce drugs must meet standards such as: GMP as recommended by WHO (GMP - WHO) The warehouse system meets GSP standards, good laboratory practice on vaccines and biological products (GLP), good practice in drug distribution (GDP), and good practice in pharmacy management (GPP) To join the pharmaceutical industry, a new company must meet the above criteria The risk of potential competitors of DHG appearing is not high 1.2.3 Supplier pressure Suppliers to the pharmaceutical industry are mainly raw material suppliers drug processing and labor resource suppliers Vietnam's pharmaceutical industry is still in a state of unbalanced and fragmented development The pharmaceutical industry only focuses on the apothecary industry while there are many limitations in the raw material production industry Currently, raw materials for drug preparation in the country still have to be imported to 90% The whole country has only production facility for raw materials antibiotics Amoxicillin and Ampicillin, accounting for about 1% of drug production value and 0.3% of drug consumption value in Vietnam Therefore, at present, the power of the suppliers of raw materials for drug processing to the industry is still high, so the pressure from these suppliers on the industry is high Pharmaceutical industry is a specific industry that requires human resources with high professional qualifications and practical experience However, with the current situation, the source of high-quality labor is still not enough to meet the high requirements of the industry 1.2.4 Customer pressure Pharmaceutical is one of the essential commodities, the end consumer is mainly the people, they are willing to spend money to buy the product without any bargaining on the price Therefore, customer pressure is unlikely to exist in the pharmaceutical industry 1.2.5 Alternative products On the market today, there are many products to care for human health such as: herbal medicine, traditional medicine, natural products, These drugs are also competing fiercely to attract customers with their specific treatment and advertising in oriental medicine clinics is quite popular in our country Besides, nowadays, people tend to use less Western medicine because Western medicine often heats up the body Instead, consumers look to traditional remedies, natural products, closer to the environment Therefore, this is also a big challenge for the pharmaceutical industry to constantly improve products to meet the needs of consumers to avoid the risk of being replaced by other products 1.2.3 Analysis of the internal environment of DHG Pharmaceutical Joint Stock Company 1.2.3.1 Evaluation of the company's business performance Features of the business environment in 2021: In March 2021, the Prime Minister approved the Pharmaceutical Industry Development Program to 2030, with a vision to 2045 With these advantages, if there is a serious and methodical long-term investment and development strategy, enterprises not only maintain the domestic market but also create momentum for international integration more and more deeply At DHG Pharma, the company is always aware of its mission of providing high quality and safe products to protect people's health Over the years, the company has focused on Non Betalactam products, and has provided products of outstanding quality in the production line according to the global standard system, with the main scope of the market domestic Business results The Covid-19 pandemic brought many challenges to the economy in general and the pharmaceutical industry, but DHG still recorded positive business results Specifically, at the end of the third quarter of 2021, DHG achieved net revenue of 944 billion dong, up 9.2% and accumulated in the first months, the Company achieved 2,910 billion dong in net revenue and 675 billion dong in pre-tax profit, increased 14% and 15% respectively over the same period in 2020 - also the highest number in the industry 10 Chapter 2: FINANCIAL ANALYSIS AND VALUATION OF JOINT STOCK COMPANY DHG PHARMACO (DHG) 2.1 DHG's cost of capital 2.1.1 Capital structure of company DHG's capital structure is determined based on the balance sheet of DHG Pharma Company in 2021 According to Vietnamese Accounting Standards, the equity of the enterprise including owner's contributed capital, capital surplus, and undistributed profits and funds (except the reserve fund to supplement charter capital) Due to the structural analysis DHG's capital is based on the consolidated financial statements (from the parent company and other companies’subsidiaries), so in the equity, we also include the interests of minority shareholders DHG's equity (at the end of 2021) = E = owner's contributed capital ownership - treasury shares + undistributed net profit + minority interest = 4,617,666,192,702 VND For corporate debt, items such as accounts payable and payable, although included in the liability of the balance sheet, are not included in debt Since DHG has no long-term loans, DHG's debt (D) is mainly with a short-term loan: D = short-term loan = 207,371,176,993 VND 2.1.2 Interest expense Interest expense of DHG Pharma in 2021 is VND 12,080,103,631 billion (Sheet “Cost of capital”) DHG's annual financial statements all reflect a large term deposit (remaining terms of more than months and less than 12 months) of around VND 2,000 billion Simultaneously with deposits, at times, the company also has short-term outstanding loans at around VND 200 billion The consolidated financial statements of 2021 show that DHG has a credit relationship with VCB Can Tho, with a limit of VND 660 billion These are secured by term deposits The loan term of the loans is up to months In 2020, loan interest rates ranged from 0.28% - 0.47%/month, equivalent to 3.36% 5.64%/year According to the financial statements of the third quarter of 2022, bank loans are bearing interest rates of 0.27% - 0.4%/month, equivalent to 3.24% to 4.8%/year This is a very good interest rate in the current market, although it has increased compared to last year's interest rate of 0.18% - 0.33%/month, equivalent to 2.16% to 3.96 % With such a preferential interest rate, DHG Pharma will have the opportunity to use capital flexibly (disburse when needed to import goods and repay debt when money is collected) while having a fixed deposit with a term long to enjoy the best interest rate 11 Accumulating months, the company's interest expense is 12 billion dong, up 20% compared to the same period last year The increase in relative terms seems to be large (20%), but the absolute increase is only billion VND Meanwhile, deposit interest in the first months of DHG was 91.4 billion dong, up 4% (more than billion dong) over the same period However, recently, when market interest rates tend to increase, DHG's short-term debt balance by the end of the third quarter has also decreased sharply, from VND 207 billion at the beginning of the year to VND 38 billion at the end of the third quarter It is worth mentioning that the company's receivables from customers and inventories as of September 30 did not have much change This means that businesses not have to reduce the amount of working capital needed for production and business activities to reduce outstanding loans DHG's total short-term assets increased by 3% at the end of the third quarter compared to the beginning of the year, while total short-term debt decreased by 16%, mainly due to the decrease in short-term debt (bank loans) The decrease in short-term debt was offset by an increase in equity, from VND 3,793 billion at the beginning of the year to VND 4,058 billion as of September 30, equivalent to an increase of 7% 2.1.3 Corporate income tax rate In 2014, the corporate income tax rate of DHG is 26.8% Starting from 2015, two new factories of DHG in Tan Phu Thach industrial zone will enjoy preferential tax rates within 15 years, specifically, the first years the tax rate is 0%, the next years the tax rate is 5%, the remaining years the tax rate is 10% In addition, in 2015, the new corporate income tax law abolished the ceiling on controlling costs related to advertising and marketing activities Thus, the estimated corporate income tax rate that DHG has to bear in the near future will decrease relatively sharply, specifically, it is estimated that it will reach 14.3% in 2015 and continue to fluctuate according to the decreasing trend in the following years and reach 11% in 2019 In 2020, the tax rate of DHG Pharma The corporate income tax rate in 2021 is 20% specified in Article 11 of Circular 78/2014/TT-BTC, specifically as follows: Enterprises engaged in the production and trading of goods and services with a total annual turnover of not more than 20 billion dong shall apply the tax rate of 20% Enterprises with a total annual revenue of over VND 20 billion apply the tax rate of 22% Thus, in the coming years, the corporate income tax rate that DHG Pharma has to bear will tend to increase 2.1.4 Weighted average cost of capital (WACC) Due to the difficulty in estimating the beta of active joint stock companies, operating in Vietnam directly from market-traded stock data securities as well as calculating the expected return of a market portfolio In the market, the more reliable method of calculating the cost of equity is the indirect method, i.e based on standard measures on a particular developed stock market, here in the United States 12 The Capital Asset Pricing Model, (CAPM), which shows the relationship between an asset's expected return to its systematic risk Since shares of DHG Pharma have been listed on the HSX since early 2006, the company's cost of equity can be estimated directly from the HSX data First, the analyst must estimate the beta coefficient of DHG Pharma This is a measure of the correlation between the variability of corporate stock returns and the return of the market portfolio For consistency, the VN - Index is still used to represent the market portfolio The most common method of estimating the beta coefficient in practice is based on historical data Beta is estimated specifically in Sheet “ERP” Sheet “ERP” presents VN-Index and DHG stock price from January 2017 to November 2022 Returns of VN - Index and DHG Pharmaceutical stock are calculated based on VN - Index and stock price adjusted for dividend payment, additional issue or bonus share and presented yield monthly profit of DHG Pharma and VN - Index within years with a total of 70 observations The results of the regression are summarized below with the graph presented in the sheet The estimated beta of DHG stock is 0.555909 According to the CAPM model, the cost of equity of DHG Pharma depends on the risk-free rate of return, the market risk premium, and the beta of DHG Pharma 13 Risk-free rate of return = Yield of 1-year government bonds in Feb 2022 = 5.18%/year Historical VN-Index return = Average growth rate, = 21.12%/year Historical risk-free rate = Average yield on 1-year government bonds, 2001-10 = 4.4%/year Market risk premium = 10.82% DHG beta coefficient = beta DHG = 0.555909 Cost of Equity = 12.62% After determining the target capital structure and the cost of capital of all kinds, the analyst calculates the weighted average cost of capital equal to 93.34% (Sheet “Cost of capital”) 𝐸 WACC= 𝐷+𝐸 𝑟𝑒 + 𝐷 𝐷+𝐸 (1 − 𝑡𝑐 )𝑟𝑑 2.2 The free cash flow of DHG Pharma 2.2.1 Profits from business activities In 2021, net revenue of DHG Pharma is VND 4,003,170.417,099, earning before tax (EBT) is VND 864,001,891,842 and interest expense is VND 12,080,103,631 Therefore, the earnings before interest and tax (EBIT) of DHG Pharma is VND 876,081,995,473 This profit includes income from financial investments Since DHG Pharma is valued primarily to find the value of assets for main business activities, in EBIT, income from financial investments should be excluded In 2021, the revenue from financial investments of DHG Pharma is 122,939,313,054 VND Then, the adjusted EBIT for 2021 will be equal to 753,142,682,419 With the prescribed tax rate of 10%, DHG Pharma’s after-tax adjusted EBIT is equal to: EBIT (1 - tc) = 753,142,682,419 * (1 - 10%) = 677,828,414,177 VND 2.2.2 Return on capital 14 Return on Capital (ROC) is calculated by dividing the adjusted EBIT after tax by the invested capital Investment capital = 1,668,641,014,030 VND ROC = 677,828,414.177/1,668.641,014,030 = 40.62% 2.2.3 Reinvestment rate In 2021, DHG Pharma spent VND 24,562,126,487 to invest in procurement, construction of fixed assets and other long-term assets and VND 24,108,379,057 to contribute capital to other entities Thus, the total new fixed investment expenditure of DHG Pharma is 48,670,505,544 VND Depreciation of fixed assets of the enterprise in 2021 is equal to 83,863,617,460 Working capital excluding cash and securities of DHG Pharma is equal to receivables plus inventory plus other short-term assets and minus accounts payable Therefore, working capital excluding cash and securities of DHG Pharma Table 2.1: DHG's working capital in 2020-2021 Year Receivables Inventory Other current assets Short-term payables Working capital 2020 496,020.199,824 826,585,429,976 11,139,770,801 816,433,295,601 517,312,105,000 2021 488,071,438,874 1,072,605,509,022 13,242,478,075 757,715,602,158 816,203,823,813 In 2021, working capital of DHG Pharma has increased to VND 298,891,718,813 The reinvestment equals the new fixed investment minus depreciation and plus the change in working capital: Reinvestment = CAPEX - DEPR + Change in WC = 48,670,505,544 - 83,863,617,460 + 298,891,718,813 = VND 263,698,606,897 The reinvestment rate is calculated as the ratio between the reinvestment and the after-tax adjusted EBIT: Reinvest / EBIT (1 -tc) = 263,698,606,897/677.828,414.177 = 38.903% 2.2.4 Two-stage growth model Growth Forecast (g): To forecast sales we start by looking at sales over the past years We have net revenue of DHG Pharmaceutical Joint Stock Company over the years from 2017-2021 Table 2.2: Net Revenue of DHG from 2017 to 2021 Year 2017 2018 2019 Net Revenue Growth rate (%) 4,062,753,464,495 3,882,128,209,711 3,896,753,829,224 7.394 15 -4.446 0.377 2020 2021 3,755,619,311,324 4,003,170,417,099 -3.622 6.591 Graph 2.1: Net Revenue of DHG from 2017 to 2021 According to the data table, the net growth rate of DHG in 2018 and 2020 is negative and this is the lowest growth rate of DHG since the first year of listing However, the figures for 2021 recorded a growth, the second largest in the last years The main reason is due to the impact of the COVID-19 pandemic, Vietnam's pharmaceutical industry faced many difficulties such as supply chain disruptions, high prices of input materials and transportation, and the antiepidemic distance caused the market to slow down stagnant However, the market gradually improved when entering 2022, when the epidemic gradually passed According to statistics, in the first quarter of the year, despite a decrease in industry revenue, net profit still grew positively by 25.4% over the same period in 2021 Entering the second quarter of 2022, the industry's recovery was still maintained at a slow pace but there are also businesses ready to get back on track As of the first half of the year, the company achieved 2,184 billion dong in revenue and 490 billion dong in profit, up more than 11% and 21% respectively over the same period last year In addition, in July 2022, DHG Pharma started construction of a new Beta Lactam factory with international GMP standards, expected to go into operation in 2024, helping to double the current capacity In short, with a promising market, improved capacity, and the mind and vision of a leading enterprise in the industry, DHG Pharma has positive development prospects in the postpandemic period of Covid-19 16 Chapter 3: Prediction of the company's future growth rate 3.1 Basis for forecasting growth rate of DHG in the coming years On July 9, 2022, the company officially started construction of a new Beta Lactam factory in accordance with JAPAN/EU-GMP standards in Hau Giang province The project is expected to go into operation in 2024, helping to double the current capacity In the distribution segment, not only continue to promote strategic and key drug products such as Hapacol, Klamentin, Medlon, Bocalex DHG Pharma has also recently distributed high quality health care products such as water collagen ALFE from Japan… In 2022, DHG Pharma targets net revenue of VND 4,220 billion, profit before tax of VND 853 billion At the end of the second quarter, the company achieved 51.8% of the revenue plan and 64.1% of the profit plan It is proved that the management ability of the board of shareholders and timely measures have helped DHG recover quickly during the pandemic DHG Pharma was honored as "Top 50 best listed companies in 2022" This list is ranked from the selection of companies with the best business results, listed on the Ho Chi Minh City Stock Exchange (HoSE) and the Hanoi Stock Exchange (HNX) This is also the 10th time the company has achieved this position Based on the above statement, it is forecasted that DHG's revenue growth rate will grow strongly in 2022-2026, and the growth rate will gradually decrease from 3-4% in the period from 2027 to 2031 and step by step into a period of steady growth Specifically forecast: Table 3.1: Forecast of revenue growth rate of DHG over the years Year Growt h rate (%) 2022 F 9.03 2023 F 9.03 2024 F 9.03 2025 F 9.03 2026 F 9.03 2027 F 5.38 2028 F 5.38 2029 F 5.38 2030 F 5.38 Assume the following two-stage growth model From 2022-2026: fast growth rate From 2027 - 2031: stable revenue growth The rapid growth - period: 2022 – 2026 3.2: Expected cash flow of DHG Year Revenue growth rate (%) 2022F 9.03 2023F 9.03 2024F 9.03 17 2025F 9.03 2026F 9.03 2031 F 5.38 Reinvest ment rate (%) Tax rate (%) EBIT (operating income) EBIT (t1) Reinvest ment FCFF WACC (%) PV (FCFF) 23.31 28.15 32.17 37.87 37.10 4.42 4.42 4.42 4.42 4.42 1,188,814,92 7,707 1,511,734,45 9,918 1,826,218,52 5,820 2,280,997,73 6,609 2,625,472,76 0,917 1,136,549,58 4,876 300,835,717, 492 835,713,867, 384 4.34 1,444,980,89 5,328 259,684,191, 618 1,186,296,70 3,710 4.34 1,745,578,30 7,877 292,477,618, 072 1,453,100,68 9,805 4.34 2,180,275,86 1,322 330,264,803, 164 1,850,011,05 8,158 4.34 2,509,539,92 3,391 1,008,328,20 4,256 1,501,211,71 9,135 4.34 800,976,725, 002 1,089,727,47 0,901 1,279,329,96 4,839 1,561,073,94 5,364 1,214,096,99 6,652 The Steady-growth period from 2027 to 2031: When entering the stable growth phase, DHG Pharmaceutical Joint Stock Company is expected to have a growth rate of 5.38%, reinvestment rate of 36.53% Therefore, we have free cash flow in 2031, FCFF ending value in 2031 is VND 1,600,213,328,596 The value ending in 2031 is: TV = FCFF / (WACC - g) = 1,600,213,328,596 / (3% - 5.38%) = -67,235,854,142,689.1 Discount free cash flow: Sum of PV = VND 624,215,531,911,664 3.2 Equity value According to the above calculated results, the value of assets to serve production and business activities of DHG Pharmaceutical Joint Stock Company is VND 583,641,522,337,406 From the balance sheet of DHG, we see that the cash in 2021 is VND 43,380,138,449 and the debt value of the company at the end of 2021 is VND 845,506,753,283 and minority interests are VND 3,133,529,466, so we have the equity value of DHG Pharma is VND 582,836,262,193,106 Number of outstanding shares: 130,746,071 shares So, the value of DHG per share is VND 45,246 3.3: DHG Pharma's stock price movement 18 Starting from March 2022, DHG's price line has fallen into the price market down on breaking the 100-day MA support And now, DHG is trading below all short- and medium-term moving averages like MA10, MA20, MA50 or MA100 day As can be seen on the chart, the market signals relatively negative of DHG stock From the beginning of 2022, the highest price reached 134,000 VND on January 5, 2022 According to the current price movement, it can be seen that the price of DHG in the near future will continue to decrease and show no sign of increasing again Therefore, it is advisable not to hold this stock for short-term investors 3.4 Commenting on the growth rate of DHG in the future: According to the revenue growth forecast as described above, DHG’s revenue in the period 2022-2026 tends to slow down and the average growth rate will reach 7.06% Although Hau Giang Pharmaceutical Joint Stock Company has always been the leading enterprise in Vietnam's pharmaceutical industry, DHG's market share is still not at a safe level Besides, with increasingly fierce competition on the OTC channel like now, DHG is facing the risk of losing market share quite high On July 9, 2022, Hau Giang Pharmaceutical Joint Stock Company (DHG) held a groundbreaking ceremony to build a Beta Lactam factory meeting Japan/Eu-GMP standards, at Tan Phu Thach commune, Chau Thanh A district, Hau Giang province The project promises to bring many impacts and great contributions to the pharmaceutical industry, consumers and employees In 2021, despite the impact of COVID-19, DHG Pharma still completed the annual plan These results partly reflect the right direction of the company in making continuous investment efforts to contribute to improving the quality of life of Vietnamese families and the development of the country's pharmaceutical industry 19 In 2022, DHG Pharma targets net revenue of VND 4,220 billion, profit before tax of VND 853 billion At the end of the second quarter, the company achieved 51.8% of the revenue plan and 64.1% of the profit plan With the results achieved, once again DHG Pharma has been honored in the Top 50 best listed companies in 2022 This list is ranked from the selection of companies with the best business results, currently listed on Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) This is also the 10th time, the company has achieved this proud position Therefore, in the long term, DHG is predicted to have a solid foundation, and with a reasonable restructuring, the company will be able to improve its long-term growth rate and move towards sustainable growth 3.5 Comments, Assessments and Recommendations for Investors From the above comments and analysis, we assess that the stock of DHG Pharmaceutical Joint Stock Company is a relatively potential and stable stock, because the Company possesses many strengths of a leading pharmaceutical enterprise in the whole industry Domestic pharmaceuticals such as leading in terms of scale, outstanding production capacity, extensive distribution network, strong brand reputation, have a certain foothold in the domestic and foreign markets These factors ensure that the growth rate of DHG stock will be maintained and stable in the coming time compared to other stocks in the same industry The pricing model in the thesis gives a target price of VND 45,246, lower than the current market price of VND 39,454 Therefore, investment opinion recommendations: In short-term: DHG Pharmaceutical Joint Stock Company is not suitable for short-term investors due to the small beta risk coefficient, lack of sudden information Moreover, in the current period, the market is correcting strongly and the price of DHG's stock is also in a downtrend and there is no sign of going up again, so investing in DHG is relatively risky and risky high and investing in DHG hardly can make a profit In the medium and long term: Although, DHG is expected to have a high growth rate The growth rate will slow down in the coming time, but it is undeniable that DHG has a good growth rate, relatively stable cash flow, and quite positive financial parameters, so it is suitable for long-term investment At the same time, based on the discounted cash flow valuation method, the results are favorable to investors holding stocks in the medium and long term 20 CONCLUSION For investors, it is very important to consider valuation results before deciding to invest However, valuation is only subjective, so mistakes are inevitable The above are just our analysis, judgment and recommendations, so there are still many limitations and shortcomings as mentioned, so the recommendations given are for reference only, investors need to consider carefully Be careful and careful when making investment decisions In the process of financial analysis and valuation of DHG Pharmaceutical Joint Stock Company (DHG), I found that: DHG is an enterprise with financial potential, good production ability, and DHG shares are relatively stable and safe safe and can be considered a good stock with attractive future growth potential for investment In addition, in the process of completing the analysis, I found some difficulties as follows: the Vietnamese market is still quite young, so it is difficult to apply mathematical models to the Vietnamese market materials must be obtained from foreign markets provided by foreign experts Financial statements and information on the market are still not transparent, making it difficult to receive correct information about companies, so it is necessary to have more severe sanctions It is very important to choose the right methods for valuation and assessment weights However, the valuation is very complicated, the object of application in the topic is a business along with the shortcomings of practical experience, knowledge and time, the solutions and recommendations given in the article are only opinions of the group Due to limited research time and many shortcomings in knowledge, the topic cannot avoid certain errors Therefore, we expect teachers to evaluate and give suggestions to help us improve the topic 21 ... BUSINESS ENVIRONMENT OVERVIEW AND ANALYSIS of HAU GIANG PHARMACEUTICAL JOINT STOCK COMPANY 1.1 About company: Company name: DHG Pharmaceutical Joint- Stock Company Abbreviation: DHG PHARMA Headquarters:... needs of consumers to avoid the risk of being replaced by other products 1.2.3 Analysis of the internal environment of DHG Pharmaceutical Joint Stock Company 1.2.3.1 Evaluation of the company'' s... Pharmaceutical Joint Stock Company" to provide his analysis and judgment on the value of DHG Pharmaceutical Joint Stock Company as well as the current market price movement of DHG''s stock Analysis