PREFACE
Over the past 20 years since the Decree No 48 / CP of the Government was signed on July 11, 1998, Vietnam's stock market has undergone many changes, but is also growing stronger and stronger many different stages Vietnam stock market has expanded strongly in terms of the number of securities codes, capitalization, transaction value In which, the total market capitalization of 3 trading floors reached over 4 million billion dong, the number of listed and registered companies traded more than 1,550 codes Many industries have been developed along with economic growth The stock market has made an important contribution to Vietnam's economic development
Currently, the pharmaceutical industry is being interested in by many investors because it has a lot of potential for development The outstanding names in the pharmaceutical industry include Hau Giang Pharmaceutical JSC, Traphaco JSC, Traphaco JSC has a quite different direction than other companies in the same industry, which is more focused on traditional medicine Traphaco is almost monopoly, occupying a large market share in this segment Realizing this, | chose my thesis topic "Traphaco JSC: Analysis and valuation” to clarify the potential of this stock code
1 Research Objective
e Research Question: How do we identify the fair value of TRA’s stock?
e General Objective: Using Literature Review and applying it to find out the intrinsic value of TRA’s stock
e Specific Objective:
o Analyzing business performance of TRA and forecasting the potentials of TRA in five consecutive years (2019-2023)
o Using valuation methods to determine the intrinsic value of TRA’s stock and comparing this value with the market price so as to whether TRA has been
Trang 2© Relying on the valuation outcome and then recommending investors whether they should invest in this stock or not 2 Research Object TRAPHACO joint stock company 3 Research Scope e Time: 2014 — 2018 e Limited research: Vietnam 4 Research Methods e Literature reviewer e Data analysis 5 Research Structure
My thesis has been devided to 3 chapters: - Chapter 1: Literature Reviewer
Trang 3CHAPTER 1: LITERATURE REVIEW
1.1 Definitions 1.1.1 Stock market
The stock market is a place for individuals or businesses to buy, sell and issue shares regularly These financial activities are carried out through official institutional exchanges or the free trading market (OTC) operating under defined regulations There may be multiple stock exchanges in a certain country or region Stock markets and stock exchanges can be used to replace the same place
1.1.2 Stock
Stock is a financial asset, which is a type of securities issued in the form of a certificate or book, confirming the ownership and legitimate interests of the owner of the property
Stocks are bought and sold mainly on stock exchanges, although there may be private sales, and are the foundation of almost every portfolio These transactions must comply with Government regulations to protect investors from fraud These investments can be purchased from most securities brokers
1.1.3 Valuation
Trang 4similar products, market movement, and so on Then, this information is processed through caculations and analysis combined with the subjective judment of the model user, and then he output is the intrinsic value of the financial asset (Bodie et all, Investment 2015)
1.1.4 Intrinsic value
Intrinsic value is the qualitative or quantitative value of an asset, an investment or a company This term is used in basic analysis to estimate a company’s value and its cash flow The intrinsic value used is the interest amount in the option contract
Intrinsic value is calculated using basic analytical techniques to assess an enterprise in all aspects such as business model, corporate governance, market factors affecting businesses, goals of the business The value obtained is compared to the market value to determine whether the business is overvalued or too low by the market Typically, investors will use both qualitative measures and quantitative measures to get the most accurate results about the intrinsic value of a business However, all is an estimate, not a sure thing
1.1.5 Valuation methods a Net asset value (NAV)
Trang 5Assets — Liabilities
NAV = Total number of Outstanding Shares ?
The correct qualifying items should be included for assets and liabilities of a fund b Valuation by discounted cash flow model (DCF)
The DCF model is a way to evaluate the value of a stock or an investment project for an investor Analysts use this method to determine the future cash flow of a specific stock or project discounting the present value, thereby assessing the feasibility of the investment project If the future cash flow after the discount is too large compared to the current investment cost of the project, it can be assessed that this is a good investment project
DCF model is built on the foundation of the concept of time value of money and the relationship between profit and risk Models can be represented as mathematical expressions as follows:
CFo CF1 CF2 CFn
= (1+R)0 (1+K)1 (1+k)2 + + + + (1+k)n
PV
Where: CF; is the expected cash flow to be obtained in the future,
k is the discount rate used to discount the cash flow to the present value, nis the number of periods
The DCF model is widely used in corporate financial decisions, especially investment decisions, specifically:
- Valuation of assets, including tangible fixed assets and financial assets to make a decision to buy or sell it
Trang 6Vv Advantages of DCF
This method takes into account the entire economic life of an investment and income It brings a profit earned by a new project
It creates weight over time of financial factors Because discounted cash flow methods are clear and often consider the time value of money, this is the best method to use for long-term decisions
It allows direct comparison of the expected return of investments with borrowing costs that other methods cannot
It creates a grant for the difference in the time that investments generate their
income
This approach by recognizing the time factor provides enough for uncertainty and risk It provides a good measure of the relative profitability of capital expenditure by reducing income on current values
Y Disadvantages of DCF
Assumptions regarding permanent growth and discount rates make the DCF calculated value more sensitive Valuation of DCF will fluctuate and will not calculate the value needed if there are any smallest changes
Trang 7DCF model is suitable for longer term investment because it creates long-term value, not suitable for short-term
c Free cash flow (FCF)
Free cash flow is a method of assessing business activities which is calculated by the difference between operating cash flow and capital expenditure On the other hand, free cash flow is the cash value that businesses can obtain after expanding assets for production and business activities If you want to maximize value for shareholders, it is imperative that businesses understand what free cash flow is, thereby building investment opportunities Businesses will find it difficult to conduct business activities such as advertising, product development and paying dividends without cash Free cash flow is calculated as follows:
FCF = Net income+Depreciation—Change in Working capital—Capital expenditure The FCF is the unit of measurement of the company's cash available by working capital and fixed capital investments, or capital expenditure (CAPEX), over a certain period of time Companies want to enhance the value of shareholders, the FCF is a good way to express it
As the free cash flow increases, the strength of the balance sheet increases However, when negative free cash flow is not only a bad sign, it may be a sign that the company is investing in many different projects This valuation method can increase the value in the long term if the investments bring returns to investors
There are two types of free cash flow: Free Cash Flow for the Firm (FCFF) and Free Cash Flow to Equity (FCFE) In the content of this thesis, I use the Free Cash Flow to Firm (FCFF) model
Vv Free cash flow to firm (FCFF)
Trang 8(FCFF) represents the amount of cash flow from operations available for distribution after depreciation, tax, working capital and investment costs are accounted and paid FCFF is basically a measure of the company's profit after all costs and reinvestment This is one of many benchmarks used to compare and analyze the financial health of a company
FCFF represents cash available to investors after a company has paid all business costs, invested in current assets (such as inventory) and invests in long-term assets ( as device) FCFF includes both bondholders and shareholders when considering the remaining amount for investors
FCFF method is a good method for company operation It is taken into account all types of cash flows from cash, cash expenditures and reinvestments needed to maintain business operations The remaining amount after performing all these activities represents the company's FCFF
Free cash flow for businesses - FCFF is said to be the most important financial index of the stock value of the business Using FCFF 1s the cash flow left after dismissing all responsibilities and projections for the future will bring high accuracy
There are many formulas to determine free cash flow, one of which 1s:
FCFF = Net income + Non-cash charges + Interest x (1-tax) — Long-term investment — Investment in worrking capital
Other equations include:
FCFF = Cash Flow from Operations + Interest Expense x (1 - Tax Rate) - Capex FCFF = EBIT x (1 - tax rate) + Depreciation — Capital expenditures — Increase in Net working capital
Trang 9Y Benefit of Using FCFF:
The value of a stock is the sum of the expected cash flows of the business in the future However, stocks are not always correctly priced When understanding the FCFF method, investors who are allowed to check that stock investment are worth it It also shows the ability to pay dividends of businesses, buy back stocks or repay debts Investors should check FCFF if they want to invest in bonds or businesses
Businesses after deducting costs still have cash to prove the FCFF value is positive Conversely, when the negative FCFF value indicates that the firm does not generate enough revenue to generate profit At that time, investors should go find out why it is so
Y Limits of Using FCFF
One fact is not going to solve every investor problem: Free cash flow is only as good as the accuracy of the forecasts that are being used to simulate future growth A lot of things can happen to a company over the course of 365 days
It only works when there 1s visibility: Free cash flow metrics will only work when a company is operating with 100% transparency If there are questions about the sales practices, cost trends, and other information that can affect the free cash flow, then there is too much uncertainty to use this measurement as a tool for the investor
Trang 10ad DDM model
The dividend discount model is a different model than the above This model analyzes based on the value of dividends that businesses pay to investors, because the main dividend is the actual amount remaining after the business that shareholders receive regularly after each year Money will bring the company's value to shareholders Formula calculated as follows:
Dividend per share
Value of stocks = — -
Discount rate — Discount growth rate
According to DDM theory, dividends are the income that shareholders will have in the future To evaluate a company using DDM model, it is necessary to estimate the dividend value that the company can pay next year for investors The DDM model has two main types, namely, the dividend model does not grow and the dividend model
increases over time
Vv Advantages of DDM
Justification: The main advantage of the model is based on theory Theory is indisputable The company's value is basically the value of never-ending permanent dividends that buyers intend to receive later over time
Consistency: dividends tend to remain stable for a long time despite how much volatility occurs However, dividends will only be paid from cash in the planned company's annual fund Companies announce additional dividends in the form of one- time dividends
Trang 11Mature business: a company has grown sustainably when it can pay dividends regularly and regularly every year This shows that the company will grow more steadily in the future This is good news for many investors who like stability
v Disadvantages of DDM
Control: DDM model does not apply to major shareholders Because a large number of shares in the group have been bought by them, they can control and influence dividend policy if they wish
Too many assumptions: because it is a theory-based model, it will have many assumptions These factors are almost difficult to control for investors It reduces the validity of the model
Restrictions on use: The model applies only to stable, sustainable development companies that have proof of annual dividend payments Investors who like stability only invest in mature, stable companies, but they will miss fast-growing companies e The method of valuation by comparable
Different from discount valuation methods to determine the intrinsic value of a business, the method of enterprise valuation is based on a comparison between similar businesses (eg companies in the same industry) The comparison method is to convert the price of profit ratio (P / E), book value (P / BV), revenue (P /S) and compare similar companies to find out which company being undervalued compared to other companies in the market
In the content of the thesis, I use two ratios P/E and P/B
Vv P/E ratio
Trang 12Formula:
Stock price per share
_ EPS
P / Eis an indicator of the relationship between market prices and earnings per share It is an important indicator affecting investors’ investment decisions Income from stocks will have a decisive influence on the market price of that stock Where P is the price at which the stock is trading at the present time; EPS is the net profit after tax that the company pays to shareholders
If the P / E ratio rises, it means that the dividend rate will be high in the future according to investors' wishes; satisfied investors with low risk levels along with low market capitalization; predict the company has a medium growth rate and will pay high dividends
EPS (Earnings per share) is the profit (Income) per share This is part of the profit that the company allocates for each common stock being circulated in the market EPS is used as an indicator of company profitability, calculated by the formula:
Net income—Dividend on Preferred Stock
EPS =
Average Outstanding shares Y Benefit of P/E ratio
Rate of price earnings is considered a means of standardizing the value of a dollar of income across the stock market In theory, you can form a standardized P / E ratio by averaging the P / E ratios for 3-5 years, which can be considered a benchmark and are used to indicate whether a stock is worth buying or not
Vv Limits of P/E ratio
Trang 13used as a comparison tool when considering companies in the same field, because this type of comparison is the only type that brings a deep understanding of productivity
Moreover, leverage can also deviate the P/E ratio if the company's debt can affect stock prices
Another important limitation of the price-to-income ratio is a ratio in the P/ E calculation formula Although the market determines the value of the stock 1s due to internal information from the business, often reported by the companies themselves and therefore more easily manipulated Because income is an important input in calculating P/E, adjusting them can also affect P/E
> P/Bratio
P / B is the ratio used to compare the price of a stock against the book value of that stock This ratio is calculated by taking the current closing price of the stock divided by the latest quarterly book value of that stock
For investors, P / B is a tool to help them find low-priced stocks that most markets ignore If a business is selling shares at a price lower than its book value (ie having a P / B ratio less than 1), then there are two cases that will occur: either the market is thinking The asset value of the company has been greatly exaggerated or the income on the company's assets is too low
Trang 14The P / B index is only really useful when you consider businesses with high capital concentration or financial companies because their asset value is relatively large Because accounting must comply with strict standards, the book value of assets does not take into account intangible assets such as trademarks, trademarks, reputations, patents and intellectual property Other wisdom created by the company Book value does not mean much to service companies because their value of tangible assets is not large
The formula of P/B ratio:
Market price per share
~ Book value per share Y Benefits of P/B ratio
Book value is usually positive, is the accumulated amount, even P / E multiples are negative due to negative income
Book value is more stable than EPS, so 1t may be more useful than P / E when EPS fluctuates
To mark the company's market assets, P / B is more useful than P / E multiples Sometimes P / B is very useful in valuing companies that are expected to stop working
¥ Limits of P/B ratio
Not suitable to value stock of service companies where intangible assets such as people, customer loyalty, etc are found
The P / BV index will not be a good indicator to compare companies in the same sector due to differences in models, business strategies and segments
Not very effective in fast growing companies
Trang 151.2 Company analysis
1.2.1, Macroeconomic analysis
Macroeconomics is a branch of economics that studies the characteristics, structure and behavior of an economy in general Macroeconomics and microeconomics are the two most extensive areas of economics Macroeconomics studies synergistic indicators such as GDP, unemployment, and price indicators to understand how the economy works
Macroeconomics looks at the overall economy, as a big picture of the economy Understandably, it focuses on how to operate the entire economy through specific factors such as inflation, unemployment, GDP, and commercial activity The main macroeconomic analysis is to use a model that includes these factors to assess the economy and thus develop appropriate economic policies The government will introduce fiscal and monetary policies to control the economy through the central bank 1.2.2 Industry analysis
Industry analysis is an assessment of a specific industry and related companies The industry analysis report aims to determine the advantages that a company can gain in an industry by understanding its industry's history, trends, competitors, products, and customer base At the same time, this type of report allows investors, banks and customers to understand the fundamental points of the industry
Each industry has its customers’ differences, market share among companies, industry development, competition, regulations and business cycles Researching the industry's activities will provide investors with a deeper understanding of the business and financial situation of the company and a comparison of business relations
Trang 16substitutes, buyer power, barriers to entry and the rivalry that is created when companies compete for the previous four forces This standard industry analysis tool helps individuals use a time-tested management procedure for generating intelligent business analysis
1.2.3 Financial analysis
Financial analysis is a set of concepts, methods and tools that allow the collection and processing of accounting information and other management information to assess the financial situation of a business, assess the risks, performance levels and quality of the enterprise, the ability and potential of the enterprise, to help users to make appropriate financial decisions and management decisions
Financial analysis plays a particularly important role in corporate financial management In business activities under the state-controlled market mechanism, enterprises of different types of ownership are equal before the law in the selection of careers and business fields Therefore, there will be many people who are interested in the financial situation of enterprises such as business owners, sponsors, suppliers, customers including State agencies and employees, each pay attention to the financial situation of enterprises in different angles
1.2.4 Ratio analysis
This method is widely used in financial analysis as it is based on the normative signficance of financial ratio in financial relations
Percentage method enables analysis to efficiently exploit the data and systematical analyze the types of rates in a continuous time series or in stages Through that, economic and financial information is improved and more fully provided This enables date accumulation and accelerates the caculation of the series of the ratio such
as:
Trang 17- Proportion and ability to balance capital, capital structure and source of capital This indicator reflects the level of stability and financial autonomy
- Proportion of business operation capacity: this is a group of indicators specific to the use of resources of enterprises
- Proportion of profitability: reflecting the overall efficiency of production and business of the enterprise
Analysis and measurement of financial ratios (each year including past and future projections)
Activity ratio indicate whether the company is performing well in the management of account receivable, payables and inventory
- Inventory turnover: Inventory turnover is a percentage showing the number of times the company has sold and replaced inventory in a certain period of time Calculating inventory sales can help businesses make better decisions about prices, production, marketing and purchasing new inventories
Sales
Inventory turnover = Average Inventory
Beginning Inventory—Ending Inventory 2
Where: Average Inventory =
Liquidity ratios measure the company’s ability to repay in the short run
- Current ratio: Current ratio is the ratio of liquidity to measure the company’s ability to pay short-term obligations or due debts within a year It shows how a company can maximize its current assets on the balance sheet to meet current debts and other payables
Current Assets
Current ratio = ———
Trang 18- Ability to pay quickly (quick ratio): The quick ratio is an indicator of the company's short-term liquidity position and measures the company's ability to meet short-term obligations with the highest liquidity assets
Cash equivalents+Marketable Securitites+Account Receivables Quick ratio = —— Current Liabilities _ Current Assets—Inventory—Prepaid Expenses Current Liabilities
- Cash ratio: Cash ratio is the ratio of the company’s total cash and cash equivalents to its current debt The data calculates the company’s ability to pay short-term debt with easily liquidated cash sources The ratio of cash refers to the ability to cover the company's debt Cash Current Liabilities Cash ratio =
Solvency ratios measure the solvency of a company:
- Debt/Equity ratio: The ratio is used to evaluate the company’s financial leverage Debt/Equity ratio is an important metric used in corporate finance It 1s a measure of the extent to which a company is financing its operations through debt versus fully owned funds More specifically, it reflects the equity ability of shareholders to cover all outstanding debts in the event of a business recession
Total Equity
Debt/Equity ratio = ;
Shareholders’ Equity
- Debt ratio: Debt ratio is the financial ratio that measures the company’s leverage It can be interpreted as the ratio of a company's assets financed by debt
Total Liabilities Total Assets
Debt ratio =
Trang 19- Gross profit margin: Gross profit margin is a data used to evaluate the company's financial and business model by revealing the remaining amount of revenue after deducting cost of goods sold Gross margin is usually expressed as a percentage of revenue and can be called a gross margin
Gross Profit
Gross profit margin =
Net Sales
- Operating profit margin: Operating profit is often used as a measure to evaluate a company compared to similar companies in the same industry It can reveal top performers in an industry and show the need to research more about why a particular company is superior or lagging behind its peers
Operating Profit
Operating Profit Margin =
Total Revenue
- Net profit margin: This ratio gives a measure of net income dollars by each dollar of sales Although it is desirable for this ratio to be high, competitive forces within an industry, economic conditions, use of debt financing, and operating characteristics
Net income before Noncontrolling Interest Equity Income and Nonrecurring Items
Net Sales
Net profit margin =
- Return on assets (ROA): ROA measures the firm’s ability to utilize its assets to create profits by comparing profits with the assets tha generate the profits
Net income before Noncontrolling Interest and Nonrecurring items
ROA =
Average Total Assets
- Return on equity (ROE): ROE measures the return to both common and preferred stockholders
Net income before Nonrecurring Items — Dividends on Redeemable Preferred Stock
ROE = ;
Average Total Equity
Trang 20e Advantages:
Pattern Detection and forecasting: Financial statements are capable of revealing income each year, accumulated revenue and profits Analyzing this trend is a great benefit of the company because it forecasts the market life of about a year to be useful, as it shows the sales model for product launches, reducing sales after a year and demand for new products in a year
Budget Outline in real-time: Decision-making to plan for the future, budget estimates, corrective actions needed to effectively budget and many such decisions depend heavily on financial statements Reports reveal how much you can spend on marketing or product launches, strategies for marketing campaigns, future expansion, funding requests, etc This in terms of improving productivity, exceeding the budget and so on to keep the company healthy and increase annual profits
e Disadvantages:
Based on patterns of the market: A major disadvantage of analyzing and using financial statements to make strategic decisions based on data and data regarding current market conditions can be volatile Depending on the market, it may change quickly, so we should not assume that the numbers from the previous financial statements will not change
At-One-Time Analysis: Forecasting and analysis are only applied at a time It does not reveal or compare past performance or future forecasts at a glance People will need to be cautious by creating and reporting on a continuous basis
instead of a one-time basis
1.2.5 DuPont Analysis
Trang 21analysts will know the cause of the current state of the business The essence of this method is to separate a composite index reflecting the profitability of the achievement enterprise of other relevant indicators
The Dupont analysis is an expanded return on equity formula, calculated by multiplying the net profit margin by the asset turnover by the equity multiplier
ROE = Net profit margin x Asset turnover x Equity Multiplier
_ Net income Sales Total Assets
x X
Revenue Total Assets Shareholder’ Equity
e Net Profit margin: Expressed as a percentage of the total revenue, net margin is the revenue that remains after subtracting all operating expenses, taxes, interest and preferred stock dividends from a company's total revenue
e Assets turnover: This ratio is an efficiency measurement used to determine how effectively a company uses its assets to generate revenue The formula for calculating asset turnover ratio is total revenue divided by total assets As a general tule, the higher the resulting number, the better the company is performing
e Equity Multiplier: This ratio measures financial leverage By comparing total assets to total stockholders' equity, the equity multiplier indicates whether a company finances the purchase of assets primarily through debt or equity The higher the equity multiplier, the more leveraged the company, or the more debt it has in relation to its total assets
e DuPont analysis involves examining changes in these figures over time and matching them to corresponding changes in return on equity (ROE) By doing so, analysts can determine whether operating efficiency, asset use efficiency or leverage is most responsible for return on equity (ROE) variations
¥ DuPont model extends:
Trang 22looking at the impact of profits other than the profit from the main business activities of the business and the impact of taxes
Looking at this indicator, analysts will assess where the profit margin of the business comes from If 1t comes mainly from other profits such as liquidating assets or coming from a temporary tax exemption or reduction, analysts should pay attention to re-evaluate the actual performance of the business
Net income EBT EBIT Sales Assets
x x x x ¬
EBT EBIT Sales Assets Equity
ROE =
The Dupont formula differs from the three parts in how it represents the impact of taxes on corporate profits, and then clearly shows that interest and insurance payments can also affect this profit how The reason is that a company with higher tax rates will have less money to pay investors when compared to companies operating in a lower tax environment Since then, the rate of interest rate insurance has provided investors with additional information about the company’s leverage position If a company has less access to debt than its competitors, 1t can be assumed that they can pay more for investors than otherwise
v Advantages of DuPont Analysis
To determine the strengths and weaknesses of our company use the DuPont model The financial ratios used in the model can be separated by small scales to better understand the cause of the problem When causes are identified, businesses can perform some actions (eg, improve cost control, asset management or marketing) to improve return on equity
v Disadvantages of DuPont Analysis
The main drawback of DuPont analysis is that it uses accounting data published in financial statements, which can be manipulated to hide some weaknesses Therefore,
Trang 23Another drawback is inherent to all financial ratio analysis systems It works best to compare companies of the same size working in the same industry
1.2.6 SWOT analysis
SWOT analysis model is a useful tool used to understand the Strengths, Weaknesses, Opportunities and Threats in a project or business organization Through SWOT analysis, enterprises will clearly see their goals as well as internal and external factors that can positively or negatively affect the goals set by the business In the process of developing the strategic plan, SWOT analysis plays a role as the most basic and highly effective tool to help you have an overall view not only about the business itself but also the factors that affect and decide determine your business success
a Structure of SWOT >» Strengths
The main advantage is your own advantage, your business, your project, your product These must be the unique, outstanding features that you hold when compared to competitors Answer the question: What do you do best and best? What are the internal resources you have? How do you own the advantages of people, knowledge, reputation, skills, relationships, technology .? Here are a few areas that you can use as a basis for you to find your strengths:
Trang 24e Inheritance, culture, administration > Weaknesses
The easiest way to understand, weaknesses is what you don't do well If you feel embarrassed, the way to find the weakest point is to look back on the areas that I have suggested on the other such as resources, assets, people ., if in any "absent" strong point, then stay there will be weaknesses and weaknesses In addition, you ask yourself the following questions: What work do you do poorly, even worst? What are you avoiding? What negative comments do you get from consumers and markets etc
» Opportunities
Opportunity is the appearance of possibilities that allow people to do something In commerce, the opportunity to show the emergence of customers’ needs and therefore the ability to sell goods to satisfy the needs of both producers and consumers Opportunities appear everywhere, it is very diverse and rich However, no matter how large an organization is, it is impossible to exploit all the opportunities that appear on the market, but can only exploit opportunities appropriate to its capabilities and objectives On the other hand, opportunities that appear on the market can benefit this organization but bring disadvantages to other organizations Therefore, businesses and organizations should only exploit one or more of the existing opportunities in the market, which are attractive opportunities Attractive opportunities in trade are the ability to meet the needs of customers already and will appear on the market is considered to match the objectives and potential of the business Therefore businesses have favorable conditions to exploit and overcome it to earn profits
» Threats
Trang 25+ Opponents have lower prices + Goods are easy to have substitutes + Slow market growth
+ Conversion in trade and exchange policies with foreign countries + Business vulnerability of business cycle
+ Strength of customers or suppliers is increasing + Change the needs of buyers and their preferences + Demographic changes
Risks appear beyond the control of businesses, organizations, they can only avoid the risks that may happen to them and if faced with it, try to reduce the damage to the lowest level Analyzing the risk of helping enterprises make necessary changes and adjustments to changes and fluctuations that adversely affect their production and
business activities
b Advantages of SWOT
Free: One of the biggest advantages of SWOT analysis is that it has no related costs It is an analysis of anyone doing business that can be completed reasonably, and therefore, does not require the participation of experts or consultants This is an effective method to analyze projects and proposals in a company in any function or industry
New idea: Another benefit of SWOT analysis is that it can help create new ideas for businesses By looking at the issues that appear in columns and SWOT analyzes, it not only raises awareness of potential (and disadvantages) and threats but also helps us react More effective in the future, plan to prepare when risks occur
Trang 26brand, redeem or cooperate or outsource a business function In addition, SWOT analysis can be beneficial in evaluating a specific supply, business process, product market or the implementation of a specific technology
Multi-level analysis: You can get valuable information about the goal of the goal by looking at each of the four elements of the SWOT analysis - strengths, weaknesses, opportunities and threats - independently or in combination For example, threats identified in the business environment, such as new government regulations on product design or competitive product launches, can alert business owners that an item Proposed investments in new production lines need to be evaluated more carefully In addition, an awareness of a company's weakness such as the lack of qualified staff may suggest the need to consider outsourcing specific functions In return, opportunities such as the availability of low-interest loans to startups can encourage entrepreneurs to pursue the development of a new product to meet rising customer demand On the contrary, strengths identified, such as extensive experience in a fast-growing international industry, may suggest the need for cooperation with foreign companies
Data integration: SWOT analysis requires combining quantitative and qualitative information from a number of sources Accessing a range of data from multiple sources helps to improve enterprise-level policy-making and planning, improve decision-making, improve communication and help coordinate activities
c Limits of using SWOT
The results of analysis are not intensive: Usually, SWOT analysis is quite simple, it is often not given criticism If the company only focuses on project preparation based on SWOT Analysis, it is not enough to assess and orient the goals For example, a long list of problems cannot be solved by strengths and weaknesses and they are also important and must be solved
Trang 27influenced by the foundation of SWOT or less relevant by the uncertainty of external factors such as market instability, be 1t weaknesses or threats if a small business financial search For analysis to affect company performance, business decisions must be based on reliable, relevant and comparable data However, collecting and analyzing SWOT data can be a subjective process reflecting the bias of individuals conducting analysis In addition, input data for SWOT analysis may also become obsolete quite quickly
Only frame structure: As a frame, SWOT is valuable However, it does not provide the department manager with specific guidance or let managers know how to identify key aspects for itself It relies on competent managers to accurately identify and prioritize the most important factors This is not an easy task, whether you run a startup or a large nonprofit organization Government laws and rapid market changes can have a big impact on your business, but they require extensive market research to manage, outside the field of SWOT analysis
Trang 28CHAPTER 2: ANALYSIS OF TRA PERFORMANCE 2.1 Overview of TRAPHACO (TRA) 2.1.1 Informations ° Trading name: TRAPHACO Joint Stock Company e Chartered capital: 345,455, 160,000 ° Address: No 75 Yen Ninh Street, Ba Dinh District, Hanoi se Tel: 84-(4) 3683 0751 Fax: 84-(4) 3681 5097 e Website: http://traphaco.com.vn ° Email: info(@traphaco.com.vn e Stock information: Listing: TRAPHACO 1s approved by the Ho Chi Minh Stock Exchange
° Type of stock: Common stock ° Stock code: TRA
e Par value: VND 10,000 per share e Volume of shares: 41,453,673 e _- First trading day: 26/11/2008
e Vission 2020: By 2020, the number one pharmaceutical company in Vietnam in terms of revenue growth, profit, market capitalization
e Mission: Innovative innovations Green pharmaceuticals protect human health 2.1.2 Core values
e Pioneers: Leading in the green value chain management, mnovation and application of new knowledge and technology
Trang 29e Responsibility: Commit and implement commitment to social responsibility, shareholders, customers, partners and employees on the principle of mutual benefit Identity: Cultural identity and people of Traphaco: Aspiration, passion, dedication
2.1.3 History and development process
1972: The medicine production team of Railway Medical Company, established on November 28, 1972 With 15 employees, the main task is to dispense prescription drugs Production of serum, infusion fluid, distilled water to serve the Railway Hospital in the period of resistance war against America Headquartered at 75 Yen Ninh - Hanoi with the Railway Medical Bureau
1977: For a time, due to the requirements of the situation, the production team moved to work only for drug distribution and circulation By August 31, 1977, the production team was rehabilitated with the function of producing medicine and supplying medical equipment for the whole railway industry, at this time there were 37 employees
1981: Railway drug production workshop, established on May 28, 1981, upgraded from the medicine production team Railway production scale was expanded
1993: Railway Pharmaceutical Factory, established on June 1, 1993 (trading name is RAPHACO), has legal status, seal, has its own account, field of drug production and supply At that time, there were 80 employees, legal capital of 150 million, rudimentary equipment, backward space, narrow space (the whole enterprise was 340 m2), more difficult than favorable, but with courage and determination mind surpassing difficulties to create a career step by step
Trang 30medical The company rented a business shop at 18A Le Duan, No 9 Lang Ha, No 31 Lang Ha, 108 Thanh Cong to be a general warehouse The direct participation in the distribution and distribution of drugs, supplies and medical equipment has helped businesses grasp the needs of the market Due to the desire to meet the quality and scale of production, the Company built 6000 m2 workshop by renting premises at Bai Phuc Xa, Xuan La 1, Xuan La 2 and Phu Thuong
1999: Decision on equitization into a pharmaceutical and medical equipment and medical equipment joint stock company on September 27, 1999 with 45% of state capital, following the policy of renovation and enterprise reform of the House water to improve production and business efficiency This is the most important time, the leadership and all employees have actively prepared all legal conditions for the founding shareholders' meeting held on November 15, 1999
2000: In January 2000, the pharmaceutical and medical equipment and medical equipment joint stock company officially operated as a joint stock company model By July 5, 2001, the Pharmaceutical and Medical Equipment Joint Stock Company changed its name to TRAPHACO Joint Stock Company, with the purpose of multi-business business in accordance with the new economic trend Main business areas: Pharmaceuticals, Pharmaceuticals, Chemicals, Medical supplies and equipment, Food, alcohol, beer, soft drinks, Cosmetics, Consulting, Scientific and technical services, Public transfer technology in medicine, pharmacy and import-export business
Trang 312008: On November 26, 2008, TRA's stock code was officially traded on HOSE Traphaco is honored to receive Vietnam Compassion Gold Cup
2009: TRAPHACO is recognized as the most famous brand in Vietnam Pharmaceutical Industry
Launching Traphaco Sapa Limited Company in Lao Cai, Traphaco officially owns 100% capital
2010: TRAPHACO was the only Vietnamese unit to receive the WIPO Award presented by the World Intellectual Property Organization Awarded III Social responsibility in the field of Environment (CSR), TOP 100 Vietnamese Gold Stars And in particular On December 10, 2010, TRAPHACO was honored to organize the Ceremony to receive the title of Labor Hero for achievements of the period of development (2000 - 2009)
2011: In November 2011, TRAPHACO successfully acquired TRAPHACO Hi- tech Joint Stock Company, increasing ownership in TRAPHACO CNC from 12.83% to 50.96%
Establishment of 5 more branches in: Binh Thuan, Dong Nai, Quang Ngai, Can Tho, Khanh Hoa
TRAPHACO is honored to receive the TOP 100 Golden Stars in Vietnam ”, especially the” TOP 10 Enterprises with Corporate Social Responsibility "awards
For the first time, TRAPHACO participated in the "Annual Report 2010" and won the "Best Annual Report" award Along with this award, TRAPHACO is ranked AAA "Annual Report of Vietnam's credit rating" for high-performing enterprises, demonstrating transparency, strong financial potential, long-term development prospects , control the source of business capital and risks at the lowest level
Trang 32sustainable development of TRAPHACO medicinal materials), which has received funding from The World Bank through the "Vietnam Creative Day 2011" Program
In April 2011, the topic "Research on the production of liver tonic to detoxify Boganic from Vietnamese medicinal herbs" by TRAPHACO was awarded the first prize by Vietnam Creative Technology Support Fund (VIFOTEC)
2012: On October 29, 2012, TRAPHACO became a major shareholder of Quang Tri Pharmaceutical - Medical Supplies Jomt Stock Company with the ownership rate of 42.91% of charter capital
On May 11, 2012, TRAPHACO officially became a major shareholder of Dak Lak Pharmaceutical - Medical Supplies Joint Stock Company with the ownership rate of 24.5% On October 10, 2012, TRAPHACO successfully acquired shares of Dak Lak Pharmaceutical Joint Stock Company - Dak Lak Medical Supplies increased its ownership rate from 24.5% to 51%
Established 2 more branches in Quang Ninh and Gia Lai to increase the total number of branches in the company so far to 14 branches (2 branches level 1, 12 branches level 2)
In April 2012, TRAPHACO was honored to receive the "International Quality Award" in Germany In May 2012, TRAPHACO received TOP 10 typical businesses for the community On June 19, 2012, TRAPHACO was awarded the certificate "TOP 50 most efficient business companies in Vietnam" On October 4, 2012, TRAPHACO received a decision to award the First-class Labor Medal of the President
2013: Best International Business Award and Excellent Manager awarded by the European Business Association
2013 Asia-Pacific International Quality Award
Trang 33TOP 10 Enterprises with Corporate Social Responsibility (Vietnam Gold Star Award)
TOP 10 Most Famous Brands in Vietnam
2014: General Director of Traphaco was named Top 50 best business leaders in 2013
Traphaco received a Certificate of Merit from Vietnam High Quality Product Innovation Company in the framework of the Announcement Ceremony of High Quality Vietnamese Goods 2014
Traphaco won the title "TOP 15 Strong Brands 2013"
2015: Started construction of Vietnam Pharmaceutical Factory with a total value of VND 500 billion
Traphaco won the title of Top 15 Vietnam Strong Brands 2014 Traphaco won the title of Vietnamese Drug Star
Traphaco is ranked among Top 50 most effective trading companies in Vietnam Traphaco won the title of Top 10 Famous Brands in Vietnam
2016: General Meeting of Shareholders for the term of 2016 - 2020
Traphaco continues to be awarded the National Quality Gold Award by the Prime
Minister
Traphaco achieved the Top 40 Most Valuable Brands and Top 50 Best Listed Companies in Vietnam
Traphaco developed the company strategy for the 2017-2020 period
Trang 342017: Announcing Traphaco's sustainable development strategy for the period of
2017-2020
Traphaco inaugurated the most modern pharmaceutical factory in Vietnam Traphaco for the second time in a row achieved Top 10 most prestigious companies in Vietnam Pharmaceutical industry
Boganic liver tonic for the second time in a row reached "Top 10 Excellent Vietnamese Brand Products"
Traphaco - Top 50 enterprises with the most attractive employers in Vietnam 2.1.4 Business area
Traphaco is the leading company (in terms of both revenue and market capitalization) in the traditional medicine segment of Vietnam's pharmaceutical industry The main business activities of the company include the production and distribution of pharmaceuticals, especially traditional medicines
a Brand position
Traphaco is a brand with 37 years in the pharmaceutical industry, operating 1n the field of manufacturing and trading pharmaceutical products, chemicals, supplies and medical equipment In terms of key products, taking advantage of a rich source of medicinal herbs and traditional medicine, Traphaco has chosen to research and produce traditional medicines in high technology
Two outstanding products bearing Traphaco's brand name are Boganic - strengthening liver function and Activation of brain-nourishing blood, bringing in revenue mainly accounting for 2 of total revenue
b Manufacture systems
Trang 35Traphaco SaPa One-member Co., Ltd specializes in processing raw materials and input materials, practicing GACP research of Traphaco At the same time, it is the center to develop the area for growing medicinal herbs to supply input materials for Traphaco with high extraction lines, preliminary processing of input medicinal plants and more than 4ha of land for testing pharmaceutical plants On March 29, 2018, the Plant was granted the Certificate of "Good Manufacturing Practice" by GMP - WHO
High-tech Traphaco JSC specializes in processing products and finished products of Traphaco Factory with an area of 10,000 m2 of factory, factory including workshop: herbal medicine workshop, preliminary processing workshop, tea workshop, medicine workshop, outer powder Van Lam factory specializes in producing traditional medicines and has been registered to meet GPs standards of WHO for Oriental medicine in 2008 This is the first, largest and most modern Eastern medicine factory in Vietnam
In addition, the two remaining affiliates all produce medicines, pharmaceutical chemicals and pharmaceutical products distributed to shops
c Business line
Traphaco's products have two classification methods, one is by product type, the other is by use group Traphaco has 4 main product lines: pharmaceuticals, functional foods, cosmetics and imported products In particular, the product line that brings big revenue for Traphaco is functional food, such as Boganic, which reduces liver enzymes, detoxifies liver; or ANTOT products have a comprehensive fostering effect, stimulating appetite especially for young children
Trang 362.1.5 Ownership structure OWNERSHIP STRUCTURE Other Possessions 19% Foreign Ownership 45% State Ownership 36%
Figure 1 - Ownership structure of Traphaco (Source: stockbiz.vn) At the end of 2017, Mekong Capital divested from Traphaco, and by 28 May 2018 two representatives of Mekong Capital withdrew from the Board of Directors of Traphaco Vietnam Azalea Fund Limited (fund of Mekong Capital) and Vietnam Holding Ltd divesting nearly 25% and 10.43% Traphaco capital respectively The price that these two investment funds retreated was quite high up to 141,500 dong / share, with a value of more than 2,000 billion dong
Instead, Traphaco's shareholder structure appeared two new major shareholders, Magbi Fund Limited (Hong Kong), holding 24.99% capital and Super Delta Pte Ltd (Singapore) holds 15.12% of capital
And SCIC still owns 36% of the capital 2.1.6 Corporation structure
TRA has 4 subsidiaries (2 of which are 100% owned by TRA)
Trang 37These subsidiaries and joint ventures are responsible for producing and distributing TRA products
2.1.7 Shareholder structure
State Capital Investment Corporation (SCIC) holds 35.67% and two foreign companies are Magbi Fund Limited and Super Delta Pte.Ltd hold 24.99% and 15.12% respectively
However, SCIC's ownership rate accounts for 35.67% of Traphaco's capital and with the control actions from SCIC may negatively affect the ambitious plan and development orientation of Traphaco recently under pressure to sell shares from the company's management
2.1.8 Business overview
Trang 382.2 Macroeconomic analysis 2.2.1 Global economy
a World economy in 2018
In 2018, the global economy is more volatile US-China trade tensions exploded in the first half of 2018, upsetting the global economic context The tension in US-China trade relations negatively affected the growth of the world economy, increased trade disagreement hindered economic growth i both economies However, China is more affected than America
» Global growth
In 2018, global economic growth stabilized at 3.1% when calculated according to the market exchange rate, and 3.7% when calculated by PPP Rapid growth in the US compensates for slower growth in some other major economies, including Argentina, Canada, China, Japan, Islamic Republic of Iran, Turkey and the European Union ( EU) Despite the economic downturn in some developed countries, global economic growth has increased in more than half of the world economy in both 2017 and 2018 Global trade growth in manufacturing and industry has decreased since the beginning of 2018, especially commercial activities and investment prospects weaker than the previous year The annual expansion of global industrial production has dropped to 3% in 2018, compared with 3.5% growth in 2017 World commodity trade growth averaged 3.7% in 2018, down 1% compared to 2017
Trang 39dependent on foreign investment will face challenges in stabilizing exchange rates and preventing capital withdrawal from foreign investors when the world situation instability Percentage 3.7 a 3.7 37 WESP 270149 — = £02 ` săn Ba?2 = 3.7 Ta" 2012 \ 414 PPPs 3.1 ie 3.0 3.0 3.0% 30 2012 Market | exchange rates WESP 2018 29 ' ' 1 ' ' ' ' T 2012 2013 2014 2015 2016 2017 2012" 2019F 2020" Figure 2 - Growth of world gross product, 2012—2020 (Source: UN/DESA) Percentage points 0.20 >= | Othe developed Other 1 | —
0.15 Western cond Other
- Asia Arabia LatinAmerica/ Incl change ”— aribbean in weights 0.10 -| / Curtin h 0.05 -| / 0.00 Japan -1.ñ5 =} Argentina Canada Turkey “0.10 | Other Other EU East Asia South Asia -8.15 7] -0.20 - :
DHeuelnperl East Asia South Asia Western Latin America Other
counties Asia and Caribbean
Figure 3 - Contributions to change in world gross product growth, 2017-2018 (Soure: UN/DESA) » Monetary policy across the global
Trang 40In 2018, the Federal Reserve (Fed) raised interest rates for overnight loans among banks, mcreasing by 2.25-2.5% The Fed said the world's largest economy is still growing steadily and no longer needs support from the Fed
Meanwhile, a number of other major economies have kept interest rates at record lows for a long time The Bank of Japan on December 20, 2018 announced to maintain the target of short-term interest rate at -0.1% The European Central Bank (ECB) has just officially terminated the quantitative easing program that has lasted for the past few years, but still maintains the reference interest rate from -0.4% to 0.25%
China also announced it would continue to loosen monetary policy to reduce financial costs for private businesses and support the economy The country constantly launches new tools to pump money into the market, while keeping short-term lending rates around 2.55 - 2.7%
Bank of England has just raised interest rates once this year However, the agency also decided to remain concerned yesterday, due to concerns about the global economic outlook and instability from the UK leaving the European Union (EU)
>» Oil price peaked, dropped to the bottom in only 2 months
World crude oil prices stabilized in 6 years 2018, oil prices are about 70-75 USD per barrel By the beginning of October, prices soared to the highest level in the last 4 years, at 87 USD / barrel of Brent oil, probably because of concerns about shortage of
supply in 2019 when the US restrained sanctions against Iran