tiểu luận financial planning and capital costs ofhau giang pharamaceutical joint stock company dhg

- Hau Giang Pharmaceutical Joint Stock Company DHG announced its fourth quarter net revenue reached 1,212 billion VND, down 5% over the same period.. Pre-tax profit reached 864 billion V

UNIVERSITY OF ECONOMICS - UNIVERSITY OF DA NANG

FALCUTY OF FINANCE

 GROUP REPORT 01 TERM: ADVANCED CORPORATE FINANCE

TOPIC: FINANCIAL PLANNING AND CAPITAL COSTS OF

HAU GIANG PHARAMACEUTICAL JOINT STOCK COMPANY (DHG)

Class: 47K15.1

Teacher: PhD Nguyen Quang Minh Nhi

Members: Ha Duy Dat

Pham The Manh

Le Ngoc Giang My

Huynh Thanh Giang

Nguyen Thi Thuy Linh

Cao Nguyen Thu Uyen

Nguyen Tan Toan

Da Nang, November 10th, 2023

Table of Contents

I Brief introduction about the company 6

1.1 General introduction 6

1.2 History of formation and development 6

1.3 Development Milestones 7

1.4 Company Organizational Structure Chart 7

1.5 MAIN BUSINESS AREAS 8

1.6 OPERATIONAL SITUATION IN 3 YEARS 2020 - 2022 8

II Analysis of factors affecting revenue in 2023 12

2.1 Trend of past revenue (last 3 years) 12

2.2 The influence of expected events can greatly influence that trend 12

III Forecast balance sheet and income statement for 2023 16

3.1 Forecasting the statement of business results: 16

3.2 Balance sheet forecast: 17

IV The company's external capital (EFN) needs in 2023: 18

V The company's average cost of capital (WACC) 19

5.1 Predict the cost of debt before tax (DGC corporate borrowing rate): 19

5.2 Forecasting the cost of equity 19

5.3 Market value of equity 20

5.4 Corporate income tax ( CIT ) 21

VI CONCLUSION 21

REFERENCE: 22

APPENDIX 22

Table of Figure.

Figure 1 Charter capital increases 6

Figure 2 Company Organizational Structure Chart 7

Figure 3 Business situation of Hau Giang Pharmaceutical in 2021 8

Figure 4 Revenue in 2022 of DHG 9

Figure 5 DHG's profit after tax in 2022 10

Figure 6 Asset structure & capital of DHG 12

Figure 7 Business result of DHG in 2023 13

ASSESSMENT OF MEMBERS' ACTIVITIES

rating group (%)

Self-Cao Nguyen Thu

Uyen

- Discuss revenue growth trends

- Prepare forecast business results report

- Complete the report format

- Actively discuss

- Predict the cost of debt before tax

- Forecasting the cost of equity capital

- Actively discuss

- Completed

- on time

96%

Pham The Manh

- Discuss revenue growth trends

- Make a report using Word

- Analysis of factors affecting revenue in 2023

- Actively discuss

- Completed

on time

Ha Duy Dat

- Prepare balance sheet forecast

- Complete the report format

- Actively discuss

- Discuss revenue growth trends

- Determine the company's external capital (EFN) needs in2023

- Actively discuss

- Completed ontime

Le Ngoc Giang

My

- Discuss revenue growth trends

- Calculate the average cost of capital

company's WACC

- Actively discuss

- Completed on time

96%

Nguyen Tan

Toan

- Brief introduction of the company

- Discuss revenue growth trends

- Actively discuss

- Completed on time

90%

Planning and forecasting company activities helps students have a morecomprehensive view of how to analyze, calculate, and respond to different situationsoccurring in the context of each company Afterwards, students will have the knowledge

of creating a balance sheet and an income statement for a business, recognizing keyperformance indicators in a company, and making appropriate decisions based on thecompany's situation

The report includes 5 parts:

1 A brief description of the company (industry, main sources of income, keycompetitors, etc.)

2 Evaluate the external business environment in which company operates

3 Using the percentage of sales approach, forecast and prepare company Pro FormaFinancial Statements in 2023

4 Compute external financing needed (EFN) in year 2023

5 Based upon analysis and your reasonable assumptions, compute company’s WACC

I Brief introduction about the company

1.1 General introduction

 Vietnamese name:Hau Giang Pharmaceutical Joint Stock Company

 English name: DHG PHARMACEUTICAL JOINT –STOCK COMPANY

 Website: Tax code:1800156801

1.2 History of formation and development

DHG's predecessor was State-owned Pharmaceutical Enterprise 2/9, established on September 2, 1974 at Channel 5 Clay, Khanh Lam Commune (now Khanh Hoa Commune), U Minh District, Ca Mau Province

After April 30, 1975: The Southwest Regional Civil Medicine Committee was dissolved, and the 2/9 Pharmaceutical Enterprise was assigned to the Hau Giang Department of Health to manage

In 1982: Hau Giang Pharmaceutical Joint Enterprise was established on the basis of merging 3 units: State-owned Pharmaceutical Enterprise 2/9, Pharmaceutical Company Level 2, Pharmaceutical Station

In 1988: Hau Giang Provincial People's Committee decided to merge the Medical Equipment and Materials Supply Company and Hau Giang Pharmaceutical Joint Enterprise

September 2, 2004: Equitization of Hau Giang Pharmaceutical Joint Enterprise into Hau Giang Pharmaceutical Joint Stock Company.

Figure 1 Charter capital increases

1.3 Development Milestones

- In 2004: Equitization, becoming a Joint Stock Company

- In 2005: Joined the Club of Enterprises with production revenue of over 500 billion VND DHG was the first pharmaceutical enterprise to test the clinical equivalent of Haginat and Klamentin powder Develop effective talent attraction policies, especially the "4D salary" policy

- In 2006: Initial listing of shares at Ho Chi Minh City Stock Exchange, Meets WHO standards – GMP/GLP/GSP

testing of Haginat 250mg and Glumeform 500mg Increase charter capital from 80billion VND to 200 billion VND DHG established the first 02 subsidiaries DHG Travel and SH Pharma And it convert ISO/IEC 17025 from 1999 version to 2005 version

Score Card They etablished 06 subsidiaries: CM Pharma, DT Pharma, HT Pharma, ST Pharma, DHG PP, DHG Nature

resources, Established subsidiary A&G Pharma

customers and employees DHG established 03 subsidiaries: TOT Pharma, TG Pharma and DHG Pharmaceutical Company Limited

- In 2011: Successfully implemented "Project to improve Subsidiary operational efficiency".And established subsidiary Bali Pharma.

efficiency to the Company in cost control, risk management and policy DHG established 05 distribution subsidiaries: VL Pharma, TVP Pharma, B&T Pharma, DHG PP1, DHG Nature 1

standards in Tan Phu Thanh Industrial Park with a capacity of more than 04 billionproduct units/year It Completed the new DHG 1 PRINTING - Packaging factory project of DHG PP1 in Tan Phu Thanh Industrial Park, DHG PP in Nguyen Van

Cu was dissolved according to the original policy

1.4 Company Organizational Structure Chart

Figure 2 Company Organizational Structure Chart

1.5 MAIN BUSINESS AREAS

Production and trading of pharmaceuticals, functional foods and cosmetics

1.6 OPERATIONAL SITUATION IN 3 YEARS 2020 - 2022

In 2020:

- Hau Giang Pharmaceutical Joint Stock Company (DHG) announced its fourth quarter net revenue reached 1,212 billion VND, down 5% over the same period Gross profit margin improved from 44% to 47%.

- During the quarter, selling expenses increased 4%, Business management costs decreased by 24% over the same period Financial expenses increased more than 2times to 46 billion VND, due to provisioning for long-term financial investments

- The profit of parent company Hau Giang Pharmaceutical increased slightly by 2.5%, reaching 209 billion VND

- The business results of 2020 did not fluctuate much Net revenue of VND 3,756 billion decreased by nearly 4%, but net profit reached 738 billion VND, an increase of 17% compared to 2019 Revenue achieved 99% of the plan, profit exceeded 14% The main motivation comes from this company's significant improvement in gross profit margin, from 44% to 48% on average each year

- Revenue of goods produced by Hau Giang Pharmaceutical increased, the companyfocused on selling strategic and key products They also said they had successfullyimplemented the project to increase productivity and production efficiency to help reduce costs In addition, sales and management costs were reduced to be suitable during the COVID-19 epidemic period

 Hau Giang Pharmaceutical's balance sheet did not have many changes, total assets increased by 300 billion VND compared to the beginning of the year Notably, they own a relatively large amount of cash and short-term deposits, nearly 2,150 billion VND, accounting for 47% of total assets

In 2021:

- In the fourth quarter, Hau Giang Pharmaceutical's revenue decreased by 10% to VND 1,253 billion Cost prices also decreased by 15% to 545 billion VND, so the company's gross profit decreased by 4% to 548 billion VND

- During the period, DHG's financial revenue decreased by 10% to VND 29 billion Financial costs decreased by 46% to VND 25 billion

- DHG said that due to the impact of the epidemic, the Company has incurred costs for applying measure 3 on-site and other costs related to the epidemic Of which,

280 billion VND is sales costs and 74 billion VND is business management costs

- As a result, Hau Giang Pharmaceutical recorded profit after tax of VND 170 billion, down 19% compared to the fourth quarter of 2020

- Cumulatively for the whole year 2021, thanks to the positive first quarters of the year, DHG's revenue reached 4,522 billion VND, an increase of 7% compared to

2020 Pre-tax profit reached 864 billion VND, profit after tax brought in 776 billion VND , increased by 5%

- In 2021, Hau Giang Pharmaceutical plans VND 3,970 billion in revenue and VND

821 billion in pre-tax profit With the results achieved, Hau Giang Pharmaceutical has completed its revenue target and exceeded the yearly profit target by 5.2%

- By the end of the year, total corporate assets increased by 4% compared to the beginning of the year, reaching VND 4,618 billion Of which, inventory increased

by 30% to VND 1,073 billion Liabilities decreased by 6.2% to VND 758 billion

- The Board of Directors of Hau Giang Pharmaceutical Company has just set a 2022plan with 4,220 billion VND in net revenue and 853 billion VND in pre-tax profit

In 2022:

- Hau Giang Pharmaceutical Joint Stock Company announced its financial statements for the fourth quarter of 2022 and accumulated for the whole year 2022with high revenue and profit over the same period

- Specifically, in the fourth quarter alone, net revenue reached 1,330 billion VND,

an increase of 22% over the same period Of which, DHG product revenue is 1,196 billion VND - an increase of 18% compared to the fourth quarter of 2021

- Cost of goods sold increased less than the increase in revenue, so gross profit reached 709 billion VND - an increase of 30% over the same period last year After deducting expenses, DHG's after-tax profit is 236 billion VND, an increase

of 39% compared to the fourth quarter of 2021

Figure 4 Revenue in 2022 of DHG

- In addition, DHG also controls costs, debt and cash flow well Increasing production and inventory of raw materials/finished products at low prices should significantly improve gross profit, increasing labor productivity and investment efficiency

- Cumulatively for the whole year of 2022, both DHG's revenue and PAT will achieve double-digit growth, net revenue will reach VND 4,674 billion - an increase of 17% over the same period, PAT reached 988 billion VND, an increase

of 27% compared to 2021, EPS in 2022 reached 7,318 VND

Figure 5 DHG's profit after tax in 2022

- In 2022, Hau Giang Pharmaceutical plans its business with a revenue target of VND 4,220 billion, pre-tax and after-tax profits of VND 853 billion and VND 682.4 billion, respectively Accordingly, by the end of 2022, DHG has exceeded 10.8% of its revenue target and 45% of its NPAT target.

- Company approved its 2023 business plan with net revenue of 5,000 billion VND and pre-tax profit of 1,130 billion VND, an increase of 18.5% and 32.5% respectively compared to the 2022 plan target

- As of December 31, 2022, DHG's total assets were at VND 5,168 billion, an increase of VND 554 billion compared to the beginning of the period Liabilities increased by more than 50 billion VND to 876.6 billion VND, of which short-termloans decreased by 45% to 115 billion VND

- Equity increased by 501 billion VND compared to the beginning of the year, mainly due to the increase in investment and development fund (increased by 290 billion VND) At the end of the fourth quarter, Hau Giang Pharmaceutical had more than VND 1,018 billion in undistributed after-tax profit

- On the market, DHG shares are trading at 89,400 VND/share Compared to the peak a year ago, the market price of this stock has dropped more than 26%

II Analysis of factors affecting revenue in 2023

2.1 Trend of past revenue (last 3 years)

Formula:

Percent increase in sales = annual revenue ( 𝑛𝑛𝑛+1) − annual revenue ( 𝑛𝑛)𝑛

 Argument 1: Industry-leading position

- In 2022, the Company achieved revenue of 4,676 billion VND, pre-tax profit of 1,100 billion VND, and profit after tax of 988 billion VND, an increase of 16.8%

in revenue, and 27.3% in profit This is the most brilliant production and business

result in DHG Pharma's history Thanks to the company's increasing labor productivity, investment efficiency, and good cost management, increased production output, low-priced raw material inventory and finished products, so gross profit improved significantly In 2022, the total production output of the two DHG factories will reach 5,668 million product units, an increase of 40% over the same period Production value reached 6,405 billion VND, an increase of 38% compared to the previous year Production demand increased sharply, but the production sector has made efforts to stabilize the supply of goods with the best quality.



 Argument 2: Trends affecting revenue

- Hau Giang Pharmaceutical Joint Stock Company (stock code DHG) is a leading enterprise in the pharmaceutical field in Vietnam, with 2 main product lines: Antibiotics and Analgesics - Antipyretics

- DHG Pharma's business network stretches across the country and is known as an enterprise with the largest and most extensive distribution system in Vietnam

- Difficulties: In the past three years, the pharmaceutical industry has faced difficulties such as production interruptions, supply chain disruptions, narrowing hospital channel demand due to social distancing measures but DHG Pharma Still achieving positive business results for 3 consecutive years, maintaining the leading position in revenue and profit for 26 consecutive years

- By the end of the first quarter of 2023, DHG's total assets reached more than 5,500billion VND, an increase of more than 6% compared to the beginning of the year

In particular, the company owns cash, bank deposits and cash equivalents of up to 2,538 billion VND, accounting for 46% of total assets

 Argument 3: Operational status of the company

Figure 7 Business result of DHG in 2023

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Net

Unit: BillionVND

- In 2017: Net revenue reached 4,063 billion VND, Profit after tax is 642 billion VND DHG Pharma sets a target of net revenue growth of more than 13% per yearfor the period from 2018 to 2020 Achieving today's results is thanks to the tirelessefforts of the Board of Directors and staff pellets In addition, DHG Pharma has a systematic production and business strategy, in which sustainable development continues to be the main and prerequisite goal in all business activities of the company

- In 2018: Net revenue reached 3,882 billion VND, down 4% compared to 2017 andcompleted 97% of the whole year plan (4,017 billion VND) Profit after tax reached 651 billion VND, a slight increase compared to the profit of over 642 billion VND achieved in 2017 In the stock market, DHG stock is recovering slightly, but is still at the bottom of more than a year

- In 2019: Net revenue is 3,897 billion VND, approximately the same as the previous year, Profit after tax reached 631 billion VND, more than 3% compared

to 2018

- In 2020: The enterprise recorded revenue of 3,756 billion VND, profit of 739 billion VND, down 3.6% and up 17% respectively compared to 2019 The reason for the increase in profit in 2020 is due to revenue Production increased, focusing

on selling strategic and key products of the company In addition, good

implementation of the project to increase productivity and production efficiency helps reduce costs, sales and management costs are reduced to suit the Covid-19 epidemic period

- In 2021: Thanks to the positive situation in the first quarters of the year, DHG's netrevenue reached 4,003 billion VND, an increase of 7% and profit after tax brought

in 776 billion VND, an increase of 5% compared to 2020

- In 2022: Growth of 16.8% in revenue and 27.3% in profit The above results were achieved thanks to the Company increasing labor productivity, investment efficiency and good cost management, increased production output, raw material inventory and low-priced finished products, so gross profit improved significantly

 Conclude:

- We forecast that Hau Giang Pharmaceutical's net revenue in 2023 will reach approximately 5,240 billion VND, equivalent to a growth rate of 12.06 % y/y based on the following factors:

- About the pharmaceutical industry: Vietnam's pharmaceutical industry is experiencing stable growth in recent years, with an average growth rate of 10%/year According to Fitch Solutions, it is forecast that Vietnam's