Statement Of Cash Flows Forecast Assumption.pdf

Operating Cash Flow to Current Liabilities Percentage.. Total Liabilities to Total Equity Ratio Long-term Debt to Long- term Capital Ratio.. Long-term Debt to Total Equity Ratio Operatin

HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

000

CADIVI CORPORATION

Tutor; Ms Le Thi Thanh Binh

Tutorial: Tut 3 Student: Dao Duy Thanh - 1904010094

kKhuc Minh Trang - 1704040118

Nguyen Phuong Hoa - 1904040045

Nguyen Thi Thao Nguyen - 2004010075

Nguyen Lam Phuong - 2004010085

Vu Thi Thu Phuong - 2004010088

Subject: Financial Statement Analysis

November 17", 2023

Abstract

In the rapidly growing electric cable manufacturing industry in Vietnam, CADIVI Company stands out as a significant player This project focuses on assisting investors in making well- informed decisions regarding CADIVI's stocks Utilizing a comprehensive valuation model, we evaluate CADIVI's current economic standing, corporate strategies, and past performance within the electric cable manufacturing sector By leveraging essential ratios and qualified financial statements, the study aims to determine CADIVI's current value and predict its future financial state Investors will gain valuable insights into CADIVI's potential performance in the

electric cable manufacturing industry, aiding them in making strategic investment decisions

a Rivalry among existing firms

b Threat of new entrants c Threat of substitutes d Buyer power e Supplier power Company’s strategy analysis

a Nature of products and services b Integration within the value chain

c Diploma in Geographic Diversification

d Industry diversification Financial analysis

Liquidity analysis a Current ratio b Quick ratio c Operating Cash Flow to Current Liabilities Percentage Profitable analysis

a ROA b ROCE

Solvency analysis

a Total liabilities to Total Assets Ratio

Total Liabilities to Total Equity Ratio Long-term Debt to Long- term Capital Ratio

Long-term Debt to Total Equity Ratio Operating Cash flow to Total Liabilities Ratio

f Interest Coverage ratio

Income statement forecast assumptions a Revenues (Sales)

b Deduction c Cost of Goods Sold d Selling, General, and Administrative Expenses

Financial income Financial expenses

Tangible & Intangible fixed assets

Accumulated depreciation Accumulated amortization

rrmepans Long-term investments

= Long-term assets in progress and Other long-term assets

Short-term Advances Received from the Customers

Taxes and Obligations to the State Budget Other long-term account payable Payable for the labor, Current accrued expenses, Short-term borrowings

Long-term borrowings and finance lease liabilities

o Owner capital, share premium, treasury share

3 Statement of Cash Flows Forecast Assumptions

a Operating Activity b Investing activities c Financing activities

IV Valuation V Recommendations and conclusion

1 Recommendation 2 Conclusion

I Industry & Company Strategy Analysis

1 Introduction Vietnam has been entering a phase of fast technological acceleration together with the rest of the globe All sectors of the economy, from manufacturing to business, are being modernized The wire and cable production sector is no exception, growing in step with the cycles of technology and the economy Along with developing power production output is the construction of power transmission, distribution networks and consumption The demand for electric wires and cables to build power networks has increased rapidly and strongly in recent years It is forecast to continue to rise rapidly in the coming years In addition, electric wires and cables are also used in

fields such as automobile and engine manufacturing, motor and transformer manufacturing, primary electric cable production used in airport signaling systems, telecommunications, and data transmission, etc

The solid rearguard for the peak development of the technology, post and telecommunications, and electricity industries is Vietnam Electric Cable Joint Stock Company (CADIVD, is Vietnam's leading company in the electric cable manufacturing industry The company's business operations have expanded recently, and it is now able to react to market demands in the fastest and most effective way In order to examine expansion paths in conjunction with financial management, this study centers on an examination of the business's earnings and hazards To be clear, we focus on studying and assessing the company from 2019 to 2023 and offer some recommendations for how companies might do better in the home market

2 Company background Vietnam Electric Cable Company is a business that specializes in producing various types of

electric wires and cables It was founded on October 6, 1975, under the trademark CADIVI In

September 2007, CADIVI became a joint stock corporation following its equitization At the moment, CADIVI employs a workforce of highly skilled workers Technical personnel make up

more than half of the company's workforce; the other staff members, excluding middle and

senior managers, are experienced officers and members of operational divisions At the moment,

CADIVI operates two member firms, three factories, and a nationwide distribution network with

over 200 level 1 agents In Vietnam's electric cable production sector, CADIVI is a leading technology owner with machinery and equipment from industrialized nations in the area as well as Asia and America

3 Industry and economics environment analysis a Rivalry among existing firms

In recent years, electric wire and cable products have significantly contributed to Vietnam's total export turnover, showcasing the country's growing production and technical capabilities in terms of scale, quantity, quality, and operational efficiency This sector has become an attractive investment hub for the private sector, although many new entrants face challenges due to intense competition among existing players The industry demands substantial financial commitments due to high research and production costs, and product differentiation is often unclear despite

strong brand presence and a sizable customer base Additionally, a monopoly exists in this field, leading to fierce competition in pricing, products, services, and time-to-market for new offerings Despite these challenges, the industry's rapid growth and high profitability make it intensely competitive

b Threat of new entrants

According to M-Porter, potential competitors in the industry are not present but could affect the industry in the future In general, the demand for electric wire and cable products domestically and internationally is still very large and has great potential, especially when exported to developed countries Beginners will therefore find this industry to be quite appealing But to

thrive in this market, newcomers must overcome numerous obstacles like funding, brand

recognition, large product lines, etc Due to expenses for investments, product development, and research & development, in addition to the fact that raw materials might occasionally be more

costly for new entrants, they must own a sizable quantity of money Additionally, consumers

value goods made by well-known, big corporations based on their opinions To establish a presence in this market, newcomers should focus on developing innovative concepts for their rival goods

c Threat of substitutes

As of right now, the industry's products are genuinely essential to society and a number of

industries, including communications, airport signaling systems, motor and transformer manufacture, vehicle and engine manufacturing, and energy data transmission and telecommunications, etc Since there are no true equivalent products, this industry lacks substitute products

d Buyer power

Businesses that manufacture electric wire and cable primarily serve both individuals and organizations In the product market, individual consumers have little negotiating power; nevertheless, organizations can talk to these businesses about the features, costs, quality, and add-ons of their products On the other hand, price-sensitive customers will have an advantage when negotiating with vendors Furthermore, businesses in this sector are unable to compete on price when product prices fall; as a result, they must concentrate on enhancing product quality,

which is a requirement for sustainable development Customers' competition for enterprises that manufacture electric wire and cable is generally at a steady, average level

e Supplier power Vietnam's economy gradually recovered after the period of social distancing due to the impact of

the COVID-19 epidemic; However, at the same time, they faced many challenges when the

political conflict between Russia and Ukraine led to energy supply shortages and supply chain disruptions due to the blockade to control the Covid-19 epidemic in China causing prices of most raw materials and goods to increase Therefore, competitive pressure from suppliers in the field of electric wire and cable manufacturing is quite high

4 Company’s strategy analysis a Nature of products and services

With over 48 years of development, CADIVI has garnered numerous accolades from the government and reputable groups As the premier electric cable manufacturer in Vietnam, specializing in electric wires and cables for national power and civil projects, CADIVI solidifies its top position in the domestic market and international arenas In 2022, the company maintains its status as the "No | in Vietnam's market share" (2021-2023), recognized by customers and acknowledged by the High-Quality Vietnamese Goods Business Association Additionally, CADIVI secures its position as the Vietnam National Brand for the eighth consecutive time and is honored by Forbes Vietnam as one of the "Top 25 leading company brands in the field of personal and industrial consumer goods" during the 2023 Brand Conference, with an estimated brand value of USD 13 million

b Integration within the value chain

By dividing its key business operations into two blocks—manufacturing and supply chain, or project and marketing—the CADIVI Company has vertically integrated its operations, taking ownership and management of its whole supply chain The CADIVI Company is divided into several smaller divisions that are in charge of quality control, product development, and human resource management Moreover, CADIVI Company can distribute goods without the assistance of a third-party distributor The CADIVI organization is well-known in Vietnam as a trustworthy and dependable collaborator on many projects, such as those in the manufacturing, post and

telecommunications, and electrical sectors

c Diploma in Geographic Diversification Established in 1975 as a copper wire manufacturer specializing in brass pressings, CADIVI Company has continuously expanded its presence beyond designated locations Recognizing the

potential for future industrialization and modernization, CADIVI has strategically increased its

influence across Vietnam, becoming a prominent player in various industries, from meeting basic needs to supplying the electricity, postal, and telecommunications sectors Rapid expansion has led to market dominance domestically, catering to the Vietnamese government and enterprises of all sizes

As part of its ongoing objectives, CADIVI now exports goods and services to international

markets, including the US, Iraq, and Southeast Asian countries like Laos, Cambodia, and

Myanmar The company's impressive growth, profitability, and adept risk management are evident in its significant penetration into diverse regions, both domestically and internationally

d Industry diversification Within each activity, CADIVI offers specialized sectors that offer a broad range of services and products, including the capacity to support a broad range of organizations Among these services are product development, infrastructure solutions, and product supply in accordance with various quantity requirements Thanks to its wide range of products that can be applied in numerous specialties, CADIVI is not afraid to engage in a wide range of industries, including

manufacturing, telecommunications, electricity, consumption, and cross-industry Due to its involvement in numerous industries, CADIVI has demonstrated its ability to generate revenue

from a variety of sources, allowing the company to continue growing even in the face of possible risks

IL Financial analysis 1 Liquidity analysis

a Current ratio

non 2021

m Current ratio

Current ratio, also known as current ratio, short-term liquidity ratio This is an index that shows

the ratio between current assets and short-term debt, reflecting the current ability of the business to pay those short-term debts

Current ratio of CAV over three years ranges from 1.16 to 1.28 This shows that the company's short-term liquidity position is relatively stable, the short-term assets that the company currently has are enough to cover short-term debts However, high inventory levels, especially in 2021, could indicate that the company may be holding excess inventory, limiting capital that could be used elsewhere

liabilities without relying on inventory

In 2021, the decrease in both the current and quick ratios raises concerns about short-term

liquidity Additionally, high inventory levels could lead to increased holding costs, potential obsolescence, and challenges in maintaining optimal working capital

In 2022, the improvement in CAV's current ratio is positive, indicating better short-term liquidity However, the quick ratio of 0.33 still shows dependence on inventory The reduction in inventory levels is notable and could be the result of more efficient inventory management or increased sales

c Operating Cash Flow to Current Liabilities Percentage

Operating Cash Flow to Current Liabilities Percentage indicates a company's ability to cover its short-term obligations with its operational cash flow

In 2020, the ratio 0.8 suggests that CAV appears to be partially able to pay its present obligations Unfortunately, the negative value in 2022 (-0.15) is ared flag It might show that the firm faced challenges generating enough cash to cover its short-term liabilities during that period However, the significant improvement to 35% in 2022 is impressive It seems like the company managed to turn things around and enhance its cash flow position, potentially through better financial management or improved business operations

2 Profitable analysis

It can be seen from the data that the ROA ratio of CAV has fluctuated within 3 years The decrease from 9.94% in 2020 to 6.84% in 2021 is a significant decline It could indicate various

issues such as increased expenses, declining profitability, or a less effective utilization of assets

The slight increase to 8.42% in 2022 was a positive sign, showing a potential recovery or

adjustment in the company’s asset utilization However, it's crucial to note that it hasn't reached the 2020 level, which could imply that there might still be room for improvement

If ROA examines how effectively a company is managing its assets to generate profits, ROCE

examines how well the company is managing the money its shareholders invest to generate profits The table shows the result of calculating the ROCE of Cadivi company From the table, it can be clearly seen that the rate of return on equity has fluctuated in 3 years The ROCE witnessed a significant decrease from 23.44% in 2020 to 18.88% in 2021, and profit margin also decreased over the period

Cadivi has maintained a stable ROE of 21% over the past 3 years compared to the industry average of 25% Investors can conclude that Cadivi's management has used shareholder capital effectively to generate above-average profits

3 Solvency analysis

Liquidity and solvency are two fundamental concepts in financial analysis that help assess a company's ability to meet its short-term and long-term financial obligations, respectively Both aspects are critical for understanding the overall financial health and risk profile of a company Financial analysts use a combination of liquidity and solvency ratios to form a comprehensive view of a company's financial position

Long-term Debt to Long- term Capital Ratio 0.139 0.181 0.212

Operating Cash flow to Total Liabilities Ratio 0.32 -0.14 0.07

For Cadivi and companies in material production and construction, substantial debt is common

for investing in machinery and equipment Cadivi's ratio consistently exceeded 0.5, indicating high leverage and elevated financial risk

b Total Liabilities to Total Equity Ratio

The Total Liabilities to Total Equity Ratio assesses the proportion of a company's total liabilities to its total equity, calculated by dividing total liabilities by total equity This metric offers insights into financial leverage and risk, with a higher ratio indicating higher financial risk due to a greater reliance on liabilities over equity

Throughout the three-year period, Cadivi consistently presented debt to equity ratios exceeding 1, ranging between 1.5 and 2.7 This signifies a predominant reliance on debt financing, indicating a substantial portion of the company's capital structure funded by debt

c Long-term Debt to Long- term Capital Ratio

The Long-term Debt to Long-term Capital Ratio gauges a company's long-term debt proportion relative to its total long-term capital, providing insights into its reliance on long-term debt for operations and investments This metric is crucial for assessing financial risk associated with long-term debt Cadivi maintained a low ratio, around 0.1, suggesting potential overreliance on equity and posing risks for company control To enhance feasibility and security, Cadivi should optimize the utilization of both debt and equity in a more effective manner

d Long-term Debt to Total Equity Ratio A leverage ratio called the long-term debt to total equity ratio compares a company’s total long- term debt to its shareholders' equity The ratio decreases as a company’s debt level decreases As illustrated, apparently CAV was able to draw in a lot of investors searching for a secure and developed investment thanks to its average ratio of 0.217 It indicated that the company's long- term debt was less than its total equity This suggested a lower reliance on long-term debt for

financing, which can be seen as a positive sign of financial stability

e Operating Cash flow to Total Liabilities Ratio

It is a financial metric assessing a company's capacity to meet total liabilities through operating cash flow, calculated by dividing operating cash flow by total liabilities In 2021, amid challenges from the COVID-19 impact—supply chain disruptions, rising raw material costs, and pandemic-induced resource shortages—the ratio for Cadivi significantly declined This indicated difficulties in sustaining core operation revenues and raised liquidity concerns, presenting an

unsatisfactory scenario for investors f Interest Coverage ratio

The interest coverage ratio assesses a company's ability to meet its interest obligations through its earnings A low ratio indicates potential financial strain, while a high ratio suggests robust profitability but may also imply suboptimal debt utilization Cadivi's consistent interest coverage ratio of 5.00 over the last three years is a positive indicator, showcasing strong earning capacity relative to interest expenses This stability implies a solid financial position with a substantial buffer for managing interest costs

Operating Cash Flow to Current Liabilities Percentage

m Operating Cash Flow to Current Liabilities Percentage

4 Cash flow analysis The cash flow statement, which serves to illustrate where money comes from and how it is used,

is one of the most important components of a company's financial statements Examining a cash flow statement involves taking into account three important areas: operations, financing, and investment cash flow

a Operating Activities

Cash flows from operating activities represent the regular inflows and outflows associated with a business's income and expenses during its production and operational processes This cash flow category holds paramount importance in the cash flow statement, reflecting the company's capacity to generate internal funds for debt repayment, profit distribution, and investment expansion

From 2020 to 2021, CAV experienced a significant decrease in operating cash flows, dropping

from 215,109,343,361 to -603,560,735,756 This decline signals challenges in the company's

core business activities, possibly stemming from disruptions caused by the complex developments of the Covid-19 epidemic This situation has led to disruptions in production and supply chains due to lockdowns, impacting CAV's operational and business activities, constraining product consumption, and causing delays in implemented construction projects However, i 2022, CAV's business cash flow rebounded substantially, reaching

1,230,749,806,945 This improvement is attributed to increased profits and efficient working capital management, evidenced by a reduction in inventory (1,568,213,057,175) and a decrease

in receivables (288,871,303,082) These positive adjustments suggest that the organization has made strides in optimizing working capital and enhancing the collection of receivables

b Investing Activities

Cash flow from investment activities encompasses cash movements associated with fixed asset

investments, real estate ventures, and financial investments CAV has consistently reported

negative cash flow from investing activities for three consecutive years, with the primary cash outflows directed towards the acquisition of real estate, plants, and equipment This underscores CAV's commitment to substantial investments aimed at expanding its physical assets, indicating a positive outlook for business growth

Despite the negative trend in cash flow, the company has received cash from interest, dividends, and eamed profits, implying either investments in other entities or income generation from

internal operations However, these cash inflows are relatively modest compared to the

substantial acquisitions of property, plant, and equipment (PPE) Additionally, CAV has generated cash through the sale of fixed assets, signaling potential divestment of non-core assets or operational streamlining efforts to enhance overall efficiency

c Financing activities