Finance dissertation on company analysis and valuation of hoa phat joint stock company (hpg), hoa sen group (hsg), nam kim steel joint stock company (nkg) pomina steel corporation (pom)

Dissertation submitted in partial fulfillment of the Requirement for the MSc in Finance FINANCE DISSERTATION ON COMPANY ANALYSIS AND VALUATION OF HOA PHAT JOINT STOCK COMPANY (HPG), HOA SEN GROUP (HSG), NAM KIM STEEL JOINT STOCK COMPANY (NKG) & POMINA STEEL CORPORATION (POM) PHAM THUY DUNG ID No: 21071798 Intake Supervisor: Assoc.Prof Dr Pham Duc Cuong September 2022 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126246151000000 ACKNOWLEDGEMENT I truly benefited from the fifteen months I spent pursuing the Master of Science in Finance at the University of the West of England and the Banking Academy, and I will never forget them I will cherish my stay in the UK for the rest of my life since it was a priceless experience I have never had the opportunity to interact with so many different nationalities before I want to start by saying how grateful I am to my supervisor Pham Duc Cuong From developing the research approach to finalizing the organization and completion of my work, he provided me with many insightful remarks and excellent ideas Second, I want to thank Banking Academy for providing me with the scholarship that made it possible for me to enroll in this course Thirdly, I want to express my gratitude to my parents for their unwavering and constant support throughout my whole life I also want to express my appreciation to Dang Thi Thao, who provided me with a lot of advice and support when I was studying Finally, I want to express my gratitude to all of the UWE instructors and staff members who helped me during the course Dung Pham Hanoi 18th September 2022 i EXECUTIVE SUMMARY This dissertation focuses on four significant Vietnamese steel companies: Hoa Phat Group Joint Stock Company (HPG), Hoa Sen Group (HSG), Nam Kim Steel Joint Stock Company (NKG), and POMINA Steel Corporation (POM) In an effort to provide investors with thorough guidance and useful investment suggestions about these firms, it evaluates all internal and external aspects impacting the performance and future of the companies The thesis asserts that there are opportunities for the Vietnamese steel market to expand and prosper based on the macroeconomic study First off, there is a big need for infrastructure investment in Vietnam Second, the urbanization rate in Vietnam is still rather low According to the industry analysis, health issues are present alongside shifting subcategory duties As a result, producers need to develop more creative strategies and have a better grasp of how categories are changing in the upcoming years After doing a business study, it becomes clear that HPG and HSG are the market leaders in Vietnam's steel industry since they have consistently grown significantly over time in tandem with the steel market Additionally, they are in outstanding financial shape since their financial ratios are higher than those expected for their industry According to NKG's financial data, the company has a ton of potential POM is recognized as a trustworthy company for long-term investment, despite the fact that its financial records show a worse financial status than other companies in the same industry The valuation model is used to determine the intrinsic values of the four firms Target prices for HPG, HSG, NKG, and POM are VND29,700, VND32,200, VND40,100, and VND12,400, respectively For each stock, recommendations are created after combining all evaluations ii Page i ii iii vi vii viii ACKNOWLEDGEMENTS EXECUTIVE SUMMARY TABLE OF CONTENTS ABBEVIATIONS LIST OF TABLES LIST OF FIGURES TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1.1 AN OVERVIEW ON THE GLOBAL AND VIETNAM STEEL INDUSTRY 1.2 AREA OF THE STUDY 1.3 STUDY OBJECTIVES 1.4 METHODS OF THE STUDY 1.5 ORGANIZATION OF THE STUDY CHAPTER 2: MACROECONOMICS ANALYSIS 2.1 WORLD ECONOMIC OUTLOOK FOR 2021 AND 2022 2.2 THE VIETNAM ECONOMY 2.2.1 PESTEL analysis 2.2.2 Key macroeconomic factors analysis 12 2.2.3 Summary of the Vietnam economy 16 CHAPTER 3: INDUSTRY ANALYSIS – PORTER FORCES FRAMEWORK 18 3.1 THREAT OF NEW ENTRANTS 18 3.1.1 Barriers to entry, capital requirements 18 3.1.2 Access to distribution channels 18 3.1.3 Government policies 19 3.2 BARGAINING POWER OF CUSTOMERS 19 3.2.1 Number and size of customers 19 iii 3.2.2 Differences between competitors 20 3.2.3 Switching cost 20 3.2.4 Customers’ information availability 20 3.3 BARGAINING POWER OF SUPPLIERS 21 3.3.1 Number and size of suppliers 21 3.3.2 Focal company’s ability to substitute 21 3.3.3 Uniqueness of each supplier’s product 22 3.4 COMPETITIVE RIVALRY 22 3.4.1 Number and size of competitors 22 3.4.2 Industry growth 22 3.4.3 Barriers to exit 23 3.5 THREAT OF SUBSTITUTES 24 3.5.1 Number substitute products available 24 3.5.2 Buyer propensity to substitute 24 CHAPTER 4: COMPANY ANALYSIS 26 4.1 HOA PHAT GROUP (HPG) 26 4.1.1 Business description 26 4.1.1 SWOT analysis 28 4.1.2 Financial statement analysis of HPG 30 4.1.3 Valuation 34 4.1.4 Conclusion 36 4.2 HOA SEN GROUP (HSG) 38 4.2.1 Business description 38 4.2.2 SWOT analysis 39 4.2.3 Financial statement analysis of HSG 41 4.2.4 Valuation 46 4.2.5 Conclusion 47 4.3 NAM KIM STEEL (NKG) 48 iv 4.3.1 Business description 48 4.3.2 SWOT analysis 50 4.3.3 Financial statement analysis of NKG 51 4.3.4 Valuation 56 4.3.5 Conclusion 57 4.4 POMINA STEEL CORPORATION (POM) 59 4.4.1 Business description 59 4.4.2 SWOT analysis 60 4.4.3 Financial statement analysis of POM 61 4.4.4 Valuation 66 4.4.5 Conclusion 68 CHAPTER 5: CONCLUSION 69 5.1 CONCLUSIONS AND RECOMMENDATIONS 69 5.2 LIMITATIONS 70 REFERENCES 71 APPENDIX I: BALANCE SHEET OF HPG 73 APPENDIX II: INCOME STATEMENT OF HPG 74 APPENDIX III: BALANCE SHEET OF HSG 75 APPENDIX IV: INCOME STATEMENT OF HSG 76 APPENDIX V: BALANCE SHEET OF NKG 77 APPENDIX VI: INCOME STATEMENT OF NKG 78 APPENDIX VII: BALANCE SHEET OF POM 79 APPENDIX VIII: INCOME STATEMENT OF POM 80 v ABBEVIATIONS APEC Asia-Pacific Economic Cooperation ASEAN Association of South East Asian Nations BF-BOF Furnace-Basic Oxygen Furnace CAGR Compound Annual Growth Rate CPI CPTPP EAF EU EVFTA Consumer Price Index Comprehensive and Progressive Agreement for Trans-Pacific Partnership Electric Arc Furnace European Union European Union-Vietnam Free Trade Agreement GDP Gross Domestic Product GSO General Statistics Office HOSE Ho Chi Minh City Stock Exchange HPG Hoa Phat Joint Stock Company HRC Hot-Rolled Coil HSG Hoa Sen Group IIP Index of Industrial Production IMF International Monetary Fund JSC Joint Stock Company NKG Nam Kim Steel Joint Stock Company PESTEL Political Economical Social Technical Environmental Legal POM Pomina Steel Corporation R&D Research and Development UN United Nations US United States USD United States Dollar VND Vietnam Dong VNR Vietnam Report VSA Vietnam Steel Association WB World Bank WEO World Economic Outlook WTO World Trade Organization vi LIST OF TABLES Table 4.1 SWOT analysis of HPG 28 Table 4.2 Summary of essential financial statement of HPG (2018-2021) 30 Table 4.3 P/S, P/B and P/E ratio of HPG, HSG, NKG, VCA, POM 34 Table 4.4 Price multiples valuation for HPG 35 Table 4.5 Essential financial data of HPG 35 Table 4.6 Free cash flow model for HPG 36 Table 4.7 Target price of HPG 36 Table 4.8 SWOT analysis of HSG 39 Table 4.9 Summary of essential financial statement of HSG (2018-2021) 41 Table 4.10 Price multiples valuation for HSG 46 Table 4.11 Essential financial data of HSG 46 Table 4.12 Free cash flow model for HSG 47 Table 4.13 Target price of HSG 47 Table 4.14 SWOT analysis of NKG 49 Table 4.15 Summary of essential financial statement of NKG (2018-2021) 51 Table 4.16 Price multiples valuation for NKG 55 Table 4.17 Essential financial data of NKG 56 Table 4.18 Free cash flow model for NKG 56 Table 4.19 Target price of NKG 56 Table 4.20 SWOT analysis of POM 59 Table 4.21 Summary of essential financial statement of POM 61 Table 4.22 Price multiples valuation for POM 65 Table 4.23 Essential financial data of POM 66 Table 4.24 Free cash flow model for POM 66 Table 2.25 Target price of POM 67 Table 5.1 Investment recommendations for HPG, HSG, NKG and POM 68 vii LIST OF FIGURES Figure 2.1 Inflation Trends 2021 Figure 2.2 The GDP growth (annual %) – Vietnam from 2010 to 2021 13 Figure 2.3 The inflation rate of Vietnam from 2010 to 2021 15 Figure 2.4 The index of industrial production of Vietnam from 8/2021 - 8/2022 16 Figure 4.1 HPG’s Revenue 2015 - 2019 26 Figure 4.2 Organization structure of HPG 27 Figure 4.3 Gross profit margin & net profit margin of HPG (2018-2021) 30 Figure 4.4 ROE & ROA of HPG (2018-2021) 31 Figure 4.5 Current ratio & quick ratio of HPG (2018-2021) 32 Figure 4.6 Debt-equity & debt of HPG (2018-2021) 32 Figure 4.7 Total asset turnover & fix asset turnover of HPG (2018-2021) 33 Figure 4.8 EPS & P/E of HPG (2018-2021) 34 Figure 4.9 Organization structure of HSG 39 Figure 4.10 Gross profit margin & net profit margin of HSG (2018-2021) Figure 4.11 ROE & ROA of HSG (2018-2021) 42 Figure 4.12 Current ratio & quick ratio of HSG (2018-2021) 43 Figure 4.13 Debt-equity & debt of HSG (2018-2021) 44 Figure 4.14 Total asset turnover & fix asset turnover of HSG (2018-2021) Figure 4.15 EPS & P/E of HSG (2018-2021) 44 Figure 4.16 Organization structure of NKG 49 Figure 4.17 Gross profit margin & net profit margin of NKG (2018-2021) Figure 4.18 ROE & ROA of NKG (2018-2021) 51 Figure 4.19 Current ratio & quick ratio of NKG (2018-2021) 53 Figure 4.20 Debt-equity & debt of NKG (2018-2021) 53 Figure 4.21 Total asset turnover & fix asset turnover of NKG (2018-2021) Figure 4.22 EPS & P/E of NKG (2018-2021) 54 viii 43 45 52 55 Figure 4.23 Organization structure of POM 59 Figure 4.24 Gross profit margin & net profit margin of POM (2018-2021) Figure 4.25 ROE & ROA of POM (2018-2021) 62 Figure 4.26 Current ratio & quick ratio of POM (2018-2021) 63 Figure 4.27 Debt-equity & debt of POM (2018-2021) 63 Figure 4.28 Total asset turnover & fix asset turnover of POM (2018-2021) Figure 4.29 EPS & P/E of POM (2018-2021) 64 ix 62 65