group report financial statement analysis

Inventory turnover / Average number of inventory days...144.3.. Accounts receivable turnover / Average days of collection...154.4... Website: https://www.songhong.vn/Company logo:Song Ho

TON DUC THANG UNIVERSITY

FINANCE AND BANKING

-o0o -GROUP REPORT FINANCIAL STATEMENT ANALYSIS

Instruct lecture: Duong Dang Khoa

Ho Chi Minh, October 30th, 2020

Contents of Report

I.Company introduction 6

1.1 General introduction 6

1.2 Main business products and services 6

1.3 Oriented development 7

1.4 Industry Analysis 8

1.4.1 The Garment and Textile Industry 8

1.4.2 The companies in the same industry 8

II General analysis of financial situation 8

2.1 Analysis of fluctuations 8

2.2 Capital Structure Analysis 10

III Solvency analysis 11

3.1 Quick ratio 11

3.2 Debt to equity 12

3.3 Debt ratio 13

IV Performance analysis of assets 14

4.1.Asset turnover 14

4.2 Inventory turnover / Average number of inventory days 14

4.3 Accounts receivable turnover / Average days of collection 15

4.4 Payable Turnover / Days to be paid on average 16

4.5 Fixed asset turnover 17

4.6 Short-term asset turnover 17

4.7 Cash flow cycle 18

V Profitability analysis 20

5.1 Return on Sales (ROS) 20

5.2 Return on assets (ROA) 20

5.3 Return on equity (ROE) 21

VI Profitability analysis with dupont 23

VII Analysis of market indicators( EPS, PE,…), company stock price 24

VIII Conclusion and Recommendations 25

IX References 26

Vietnam's socio-economy in 2020 took place in the context of a slowing worldeconomy, potentially unpredictable factors Global trade growth was slower thanforecast due to changes in US trade policy, and the increasingly complicated US-China trade war In addition, COVID-19 virus is spreading at high speed all aroundthe world and affecting all industries, many companies have gone bankrupt Indosmestic, this results in the first quarter of 2020, our economy also faces complicatedweather conditions, affecting food and food prices, affecting the target controlinflation, disbursement for public investment was low, domestic enterprises face manydifficulties, so to be able to stand firm and develop in this period, businesses need tocome up with the best solutions to bring efficiency in business Financial analysis isone of the important steps in managing and making investment decisions whileimproving competitiveness compared to competitors in the market

1.2 Main business products and services

GARMENT EXPORT

Song Hong Garment is an enterprise specializing in the production ofgarments with the main activity of exporting for garment brands Great wear in theworld The two main export modes the Company is implementing are processed goodsand export goods according to the shipping method on board In which, the exportgoods segment currently accounts for the main proportion in the revenue and profitstructure of the Company

DOMESTIC GARMENT

The main product of the inland area is the group of bedding and mattressproducts that company has researched, developed and is mainly distributed in thedomestic market.

Blankets - sheets – pillows products

High-end products using 100% imported fabric 250T cotton with modern color trendcombining patterns and bright, youthful design, suitable for urban life and youngfamilies

Traditional products lines use a variety of fabrics such as 100% Cotton 200T and TC170T, bring many advantages economic, convenient, soft, durable

The children's products line is a blanket - sheet - pillow product line designed fromcopyrighted images by Doraemon and Hello Kitty love, very quiet and safe forVietnamese children Intestine Cotton products contain silver nanoparticles to killbacteria, ensure protect the safety of baby's sensitive skin

Buffer products

3rd generation pure mattress with outstanding advantages using 100%pure eco-friendly cotton field, high-grade foam increases elasticity to support the backfeeling of relaxation, lasting over time, easy to transport, easy to clean, luxuriousappearance

1.3 Oriented development

Development Goals:

To become a major and reputable supplier of fashion textiles in the globalapparel supply chain

Development orientation in the medium and long term:

Based on the internal situation of the Song Hong company, the direction

of the industry, the policies of the state and to enhance the position of company, the Board of Directors develops the following development orientations:

7

Identifying the garment product group as a key role, while continuing to promote the supporting segments such as washing, printing, embroidery,bluster.

Determining the main export market is still the main, in which graduallyshifting the revenue of processed goods to export goods, looking for a way to weigh equal to between markets to avoid over-dependence on the

US market

Increase the production capacity of the domestic products sector in order

to boost serving the domestic market with more than 90 million people

1.4 Industry Analysis

1.4.1 The Garment and Textile Industry

Textile is an economic sector with a large consumption market, labor-intensive,and uncomplicated technology, suitable for the beginning of economic development ofcountries Currently, textiles are a key economic sector, not only producing to meetdomestic demand but also a key export product of Vietnam For many years,Vietnam's textile and garment industry has achieved a high export growth rate of 20%per year on average Despite remarkable achievements, if analyzed further, Vietnam'stextile and apparel industry still has many disadvantages and few advantages forsustainable development, especially in industries support has not been adequatelydeveloped

1.4.2 The companies in the same industry

Thanh Cong Apparel Company Limited(TCM)

Century Synthetic Fiber Corporation (STK)

Viettien garment corporation (VGG)

II General analysis of financial situation

2.1 Analysis of fluctuations

Figures and proportion in the balance sheet of Song Hong Textile Joint StockCompany for the period 2015-2019

2015 2016 2017 2018 2019 0.00%

Asset structure of MSH for the period 2015-2016

Cash and cash equivalents

Short-term financial assets Short-term receivables Inventory

Other current assets Long-term receivables Fixed assets Long-term financial investments Other long-term assets

In the asset structure, it has been shown that the majority of assets are short-termassets and short-term investments, accounting for the highest proportion in 2019,specifically 23,819% higher than 2015 about 4% That may be the company is usingthe cash source thoroughly However, the proportion of short-term receivables of thecompany over the past 5 years (period 2015-2019) still stands at 15%, which meansthat the management of debt collection has not really been improved and need to beovercome Besides, the inventory item of the company accounted for a quite highproportion in the company from 2015 to 2019, increased by more than 9%(INCREASED BY 342 BILLION) This shows that the company buys a lot of rawmaterials for production and business but has not been fully consumed In which, thefixed assets decreased slightly in the period 2015-2019, showing that the company isliquidating to prepare for change and development in the coming period.

2.2 Capital Structure Analysis

Equity Long-term liabilities Short-term debt

In which the capital structure shows that short-term debt always accounts for morethan 50% Then, we see 2nd place as equity increasing year by year In general, thecapital structure of the business comes from borrowing and issuing bonds In business,traders are still concerned about debt, other than irrecoverable Therefore, traders mustprepare reasonable capital to meet short-term debts The coefficient shows thesolvency between the current assets of the enterprise compared with the total short-term and long-term liabilities of the enterprise

• Coefficient> = 1: the business has the ability to pay debts (positive financialsituation)

• Coefficient <1: the firm cannot guarantee short-term debts

• Coefficient> 2: the business is completely sure about its debts

Short-term debt payment ratio =

1,675,302,800,41 1

1,869,648,282,34 1

1,940,921,455,87 7

Short-term

debt 967,548,095,287

1,244,513,334,48 9

1,433,449,100,26 5

1,485,759,651,78 7

1,269,619,775,86 6

Curren

t ratio

1.153 1.093 1.169 1.258 1.529

Conclusion: From 2015-2019, the coefficient gradually increases, showing that MSH

is getting better and better

III Solvency analysis

3.1 Quick ratio

This ratio is calculated by the relationship of current assets that can be converted

to money to short-term liabilities

Quick ratio = Coefficient> = 1: guaranteed and excessive debt repayment capacityCoefficient <1: the enterprise does not guarantee fast solvency

Coefficient => 2 enterprises completely ensure the solvency of short-term debts

11

1,675,302,800,4 11

1,869,648,282,3 41

1,940,921,455,8 77

Inventory 317,014,504,086 413,448,741,107 533,521,654,096 661,038,904,204 659,188,669,836

Current

liabilities 967,548,095,287

1,244,513,334,4 89

1,433,449,100,2 65

1,485,759,651,7 87

1,269,619,775,8 66

Coefficie

nt 0.825 0.761 0.797 0.813 1.010The coefficient shows that from 2015-2018 <1 due to high short-term debt and high inventories Although the study until 2019, the coefficient is> 1, it shows that the situation has been improved and positive

3.2 Debt to equity

Financial reporting analysts always focus on the assets of companies that arecontributed or borrowed by members and shareholders Through the calculation showsthe degree of dependence or independence with the creditor

Debt to equity ratio=

1,625,380,137, 065

1,587,254,104, 564

1,330,468,181, 943

Equity 612,523,411,934 653,363,497,494 755,219,505,204 933,723,144,896 1,235,743,498,194Debt

3.3 Debt ratio

This coefficient measures how well the firm's use of debt is compared to itsassets, which shows how many percent of its assets are borrowed Show us businessautonomy

1,625,380,137,0 65

1,587,254,104,5 64

1,330,468,181,9 43

2,380,599,642,2 69

2,520,977,249,4 60

2,566,211,680,1 37

Debt

In 2015, the coefficient is 0.68, meaning that businesses borrow 68% of their totalassets Through the analysis process shows us the long-term payment situation ofMSH

IV Performance analysis of assets

Evaluate the efficiency of assets use, operation cycle and ability to convert into money

of short-term assets in business production and business activities of enterprises

13

4.1.Asset turnover

Turnover of an asset is a measure of the efficiency of an asset in generatingrevenue Evaluate the ability to use assets of the business This coefficient is higher tohelp businesses use assets more effectively

With the total asset turnover index tends to increase over the years and is greater than

1, it shows that the use of the company's assets is really highly efficient Thecompany's revenue increased over the years Specifically, in 2016, 1 dong of assetscan generate 1.45 dong of revenue By 2017, there is a decrease but not significantly,

in 2018, it will increase sharply Most of the company's assets are short-term assetssuch as short-term investments, inventories and receivables The company focuses onusing idle money to invest and partly due to the company's policy of selling to bearand reserve inventory

4.2 Inventory turnover / Average number of inventory days

Inventory turnover ratio represents inventory management capabilities Inventoryturnover is the number of times that goods in stock on average circulate in a period.Inventory turnover ratio is often compared over the years to assess whether theinventory management capacity is good or bad over the years

Cost of goods

sold 1,697,380,891,395 2,717,909,940,818

3,157,344,913,12 2 3,482,814,704,917

Inventory 317,014,504,086 413,448,741,107 533,521,654,096 661,038,904,204 659,188,669,836

68 days until 2019, the difference may be due to goods stagnant high because of highcost of goods sold and no policy to attract customers.

4.3 Accounts receivable turnover / Average days of collection

Days of collection = 360 / Receivable turnover

Accounts receivable turnover ratio of the company is still low, customers with laterepayment in 2019, the company takes 39 days to turn over one receivable cycle,which means the company is occupied with cash, reducing the initiative of thebusiness in financing working capital in production Maybe the company has a sellingpolicy that will attract customers

4.4 Payable Turnover / Days to be paid on average

4.6 Short-term asset turnover

17

to not let idle money, although it is risky, but brings high results At the same time,there is a large amount of inventories kept by the company due to the US-China tradewar, the United States applies a tax rate of 25% to Chinese exporters, so the companymay want to reserve a large amount of inventories for prevention when meeting bothdomestic and international customers' needs Opening up competitive opportunities tomeet customer needs best compared to other companies in the same industry

4.7 Cash flow cycle

Working capital cycle is the period from when buying raw materials until themoney is collected from the enterprise's receivables

Cash conversion cycle = (Inventory time + Receivable time) - Payment time

Number of day inventory turnover 53 63 68 68

Shortening the cash conversion cycle increases a company's profitability because thelonger the cash conversion cycle is, the greater the need for external financing at highcosts Based on the data table, it shows that the rotation cycle of MSH increasesgradually over specific years, the number of rotation days increases sharply with along time of 96 days in 2018 due to the time that cash is stagnant in inventories high.However, it has decreased by 9 days to 87 days compared to 2018 in 2019 However,this date is still quite high

In addition to the efficiency of using assets, we further evaluate MSH's purchase, saleand deferred payment policy through the receivable turnover, payables and inventoriesthrough the following chart:

22

Performance management and goods purchase of MSH

Number of day inventory turnover

Number of collection day Number of repayment day

Through the following chart, we conclude that the revenues and payments of thecompany are quite effective The ineffective inventory turnover is that the company isheavily stagnant due to price fluctuations MSH needs to deal with inventory byselling bear and promoting to avoid stuck goods in stock This creates a premise forbusinesses to return capital faster and prepare well for the next period

19

2019, which means that 100 VND of revenue will generate 10 VND of profit It showsthat the company has good business performance and high efficiency in business.

5.2 Return on assets (ROA)

ROA in the period 2016-2019 gradually increases over the years, showing a goodsignal that by 2019, for every 100 dong of assets the company earns 17.5 dong profit.Showing that the company uses assets effectively and optimally the availableresources, the company focuses on short-term assets in which the billion increasesgradually over the years to 2019, accounting for 75.6% of the total assets of thecompany

5.3 Return on equity (ROE)