CAN THO FPT UNIVERSITY

GROUP PROJECT
INTERNATIONAL BUSINESS STRATEGY

BUSINESS STRATEGY
OF VINH HOAN CORPORATION
(VHC)

Can Tho, November 2021

Course: IBS301m_International Business Strategy
Class: IB1501
Group members:

1. Vu Ngoc Hieu CS150057

2. Phan Ngoc Chau CS150064
3. Nguyen Tung Linh Vy CS150801
4. Nguyen Hoang Thanh Vy CS150111
5. Huynh Huong CS150824
 TABLE OF CONTENTS

LIST OF TABLES.................................................................................... 5
LIST OF FIGURES.................................................................................. 6
ABSTRACT............................................................................................... 7
CONTENTS.............................................................................................. 8
I. INTRODUCTION................................................................................. 8
1.1 BACKGROUND AND RATIONALE........................................................8
1.1.1 Vietnam has a strong advantage in catfish...............................8
1.1.2 Vietnamese enterprises have great potential to develop the
catfish market abroad.........................................................................8
1.1.3 FTA agreements, such as EVFTA, will promote the seafood
industry................................................................................................ 9
1.1.4 State macro policies on catfish................................................11
1.2 RESEARCH OBJECTIVES AND QUESTIONS........................................12
1.3 SCOPE AND LIMITS...........................................................................13
II. LITERATURE REVIEW AND METHODOLOGIES...................14
2.1 LITERATURE REVIEW.......................................................................14
2.1.1. Business strategy analysis.......................................................14
2.1.1.1. Industry analysis...............................................................14
a. Porter’s Five Forces Model:...................................................14
2.1.1.2. Company analysis..............................................................16
a. PESTEL model:.......................................................................16
b. Analysing Firm Capabilities...................................................17
c. Competitive position................................................................18
d. International strategy.............................................................19
e. Diversification strategy............................................................19
2.2 METHODOLOGY................................................................................20
III. INDUSTRY, COMPANY AND STRATEGY ANALYSIS...........22
3.1. INDUSTRY ANALYSIS........................................................................22
3.1.1. The global whitefish (Pangasius hypophthalmus) industry. 22
3.1.2 Domestic industry analysis......................................................23
3.1.3 Porter 5 forces analysis............................................................24
 Threat of new entrants:.................................................................24
Bargaining power of buyers:.........................................................25
Bargaining power of supplier:.......................................................26
Threat of Substitutes:.....................................................................26
Degree of rivalry:...........................................................................27
Vinh Hoan's competitors in the world:.........................................27
3.2 COMPANY ANALYSIS........................................................................28
3.2.1 Company overview:..................................................................28
Achievements acquired:.................................................................28
3.2.2 PESTLE model of Vinh Hoan Group.....................................29
3.2.3. Capability................................................................................. 31
3.2.4 VHC’s Strategy analysis..........................................................31
IV. STRATEGY...................................................................................... 33
4.1. VIETNAMESE MACRO POLICY.........................................................33
4.1.1 The Vietnamese strategy of seafood from 2030 to 2045.........33
4.1.2 The impact of CPTPP and EVFTA.........................................34
4.2 CORPORATE POLICY........................................................................34
4.2.1 The effect of Covid-19..............................................................34
4.2.2 Strategies for perfecting raw materials..................................35
4.2.3 Deep processing strategy..........................................................36
4.2.4 Strategies to develop safe products for health........................38
V. FORECASTING................................................................................40
The high selling price will offset the sharp increase in operating
costs.................................................................................................... 41
Vinh Hoan's cost of capital is high in the period of 2021-2023......44
Some risks may be encountered by Vinh Hoan..............................44
VI. CONCLUSION AND RECOMMENDATION..............................46
LIST OF REFERENCES.......................................................................46
 LIST OF TABLES

Table 1. Area and output of pangasius 2015-2020................................20

Table 2: Forecast of Q3/2021 business results......................................36
Table 3. Forecast of output and average selling price of pangasius by
quarter of VHC....................................................................................... 37
Table 4. A recommendation if people are interested in investing in
Vinh Hoan................................................................................................ 42
 LIST OF FIGURES

Figure 1. Five industry environmental forces.......................................14

Figure 2. Pestel Model............................................................................16
Figure 3. GLOBAL WHITE FISH SUPPLY (Thousands of Tons)....22
Figure 4. Figure for TOP 5 EXPORT MARKET (Pangasius
hypophthalmus) of VIETNAM 2015-2019 (USD million)....................23
Figure 5. Vinh Hoan enterprise value chain.........................................35
Figure 6. Revenue results in May 2021 of Vinh Hoan (excluding Sa
Giang) compared to the same period last year.....................................37
Figure 7. Collagen amplitude (retail price) (USD/kg) and conversion
rate (%) by type...................................................................................... 41
Figure 8. Forecast business results of C&G segment in the period of
2021-2025................................................................................................. 42
 ABSTRACT

Vietnam has long been the leading seafood producer and exporter in the region,
along with Indonesia and Thailand. Seafood export becomes one of the important
sectors of the economy. Vinh Hoan is today a leader in the field of high-quality
seafood production and the largest pangasius exporter in Vietnam. In the group task,
we analyze and evaluate the overall financial position of the company VINH HOAN
and determine the performance of the business through analytical tools such as Porter
5 force analysis, PESTLE, … We propose the international business strategy in the
next 5 years of VINH HOAN Company with the expectation of sustainable
development in the international market within the next 5 years (2022 - 2026).
Research and propose new product development directions. In addition, we also plan
to complete the value chain and expand cooperation with new partners as well as new
potential markets at home and abroad. The main markets are still the US, EU and
China, strategies to help promote export markets through these regions will be
mentioned. Thereby, this is a reference for those who want to learn about VINH
HOAN company in particular and a brief overview of Vietnam's seafood industry in
general.
 CONTENTS
I. INTRODUCTION
1.1 Background and rationale
1.1.1 Vietnam has a strong advantage in catfish.

Pangasius has been raised and grown mainly in 10 provinces in the Mekong
Delta of Vietnam. The provinces of Can Tho, An Giang and Dong Thap are the largest
pangasius farming areas in the Mekong Delta, accounting for more than 75% of the
country's total pangasius production.

The total area of pangasius farming in the Mekong Delta is estimated at 5,700
hectares and the total harvest is estimated at 1.56 million tons. (Directorate of
Fisheries, 2020).

The pangasius industry has an area of about 5,000 hectares, but export
turnover has reached 1.8 billion USD and has much potential and room for
development. (Report of Vietnamnet, 2021).

According to statistics, Vietnamese pangasius is holding the world throne in

both production and export. Vietnam's pangasius production is 1.3 million tons, while
India has 650,000 tons, Bangladesh 450,000 tons, Indonesia 110,000 tons. China has
also raised and harvested 10,000 tons of pangasius in Hainan. (Report of Vietnamnet,
2021)

1.1.2 Vietnamese enterprises have great potential to develop the catfish

market abroad.

Pangasius is increasingly popular in the world thanks to its value. In 2020,

Vietnam exports pangasius to 138 markets. Top 8 main markets include: China - Hong
Kong, US, ASEAN, EU, UK, Mexico, Brazil and Colombia, accounting for 80.4% of
total export value. (Seafood.Savep, 2021)
 Vietnam is currently the largest supplier of catfish to the EU, accounting for
97.7% in volume and 98% of the total value of EU catfish imports from outside this
bloc. (Seafood.Savep, 2021)

According to the Association of Seafood Exporters and Producers (VASEP),

pangasius exports to potential markets such as Mexico, Brazil, Colombia, and
Thailand grew very strongly in the first 5 months of 2021.

Specifically, the export value of pangasius to 5 large and potential markets,

namely Mexico, Brazil, Thailand, Colombia, and Russia, has positive triple-digit
growth.

In addition, in the first 5 months of 2021, the total value of pangasius exports
to the US reached 134.2 million USD, up 55.3% over the same period last year. In
particular, in May 2021, the export value reached 32.2 million USD, up 173.4 %.
(Seafood.Savep, 2021)

Clearly analyzing the opportunities opened up in the US market for pangasius

exports, the US recognition of the equivalent of the food safety control system of
Vietnam's catfish exported to the US affirms the ability to control quality and food
safety in the production chain. Vietnam's pangasius production, processing and export
has met one of the strictest requirements, making it easier for Vietnamese pangasius to
access and expand export markets not only to the US, but also to other markets.

1.1.3 FTA agreements, such as EVFTA, will promote the seafood industry.

EVFTA is a Free Trade Agreement between Vietnam and the European Union
(EU) that was signed on June 30, 2019. Vietnamese seafood exporters are placing
high expectations on the Free Trade Agreement with the EU, which will help boost
seafood export orders to this region and help Vietnam's seafood products have the
strength to be more competitive.

EVFTA integration: Opportunities for Vietnam's seafood industry:

 Firstly, Vietnam can access a huge seafood consumption market. With 28
member countries, the EU is a large and potential market with a population of over
500 million people, a total GDP of over 15 trillion USD, accounting for about 22% of
the world's GDP. Annually, the EU's seafood demand has reached 22.03 kg/person,
5.34 kg/person higher than the world average. (Seafood.Savep, 2021).

Second, if the FTA between Vietnam and the EU is signed, the tax reduction
will be 0%, corresponding to 90% of the products exported to this market. In fact,
according to the proportion of trade between product groups, Vietnam is facing an
average tax rate of up to 7% in the EU, Vietnam's seafood products exported to the
EU are subject to a tax rate of up to 10 percent. The elimination of tariffs on most of
Vietnam's exports to the EU, including seafood, will create an important advantage for
Vietnam when competing with other competitors in the EU market. (Seafood.Savep,
2021).

Third, Vietnam will also benefit from an import perspective. The reduction of
import tax on EU strategic goods into Vietnam will help improve the industry's
technology and thereby boost production and export efficiency. This will help
Vietnam get high-quality products at a lower cost and have more choices for suppliers,
including the seafood industry.

Fourth, the relationship between Vietnam and the EU, as well as between
Vietnamese enterprises and EU enterprises, including seafood exporters, is getting
better and better. The Vietnam - EU FTA was signed to create favorable conditions
for the exchange of goods between the two sides. Under such conditions, Vietnam's
seafood exports are always noticed and facilitated.

Fifth, Vietnam has, is and will have many specific guidelines, policies and
measures to support and give incentives to export products, especially agro-forestry-
fishery products, in order to improve health competition of these products,
maintaining and developing market share, in which seafood products exported to the
EU is one of the preferential items.
 1.1.4 State macro policies on catfish.

PRIORITY PROGRAMS AND PROGRAMS

1. Project on investment and upgrading of fishery infrastructure.

2. National program for protection and development of aquatic resources.

3. National program to develop effective and sustainable fishing.

4. National program for aquaculture development.

5. Project on development of seafood processing and trade.

6. The project on scientific, technological development and digital

transformation in the fisheries sector.

7. Project on training and developing fisheries human resources.

8. Project on improving state management capacity on fisheries.

9. Project on development of co-management in the protection of aquatic

resources.

10. Project on environmental protection in fisheries activities.

Report of “Approval of the STRATEGY FOR DEVELOPMENT OF

VIETNAM FISHINE DEVELOPMENT TO 2030, VISION TO 2045” by the Prime
Minister on March 11, 2021.

Through the four main strengths of Vietnam's pangasius industry today as

analyzed, we have a basis to choose the topic of the current Vietnamese pangasius
industry and the representative company is VINH HOAN Corportion (VHC) to
conduct detailed analysis. From there, we have a basis to set up a development
strategy for VINH HOAN Corporation in the seafood segment in the next five years.
 1.2 Research objectives and questions

With the advantages that our team members realize about the catfish industry of
Vietnam listed above. Along with the current position of Vinh Hoan Joint Stock
Company in the industry. We have chosen the topic to analyze Vinh Hoan
Corporation Company and come up with future business strategies with the
expectation of sustainable development in the international market within the next 5
years.

The objective of the study is to conduct business analysis in the case of VINH
HOAN Corporation Company (VHC) to find out the current position and future
performance of the company.

This study aims to answer the following questions:

- What is the great development potential of Vietnam's seafood industry in the

coming years?

- What is the current status of Vietnam's pangasius import and export market in
the world?

- What factors affect the taste of pangasius consumption in the world?

- What is the current situation of exporting and importing pangasius of VINH

HOAN Corporation?

- What is the current basic financial situation of VINH HOAN Corporation?

- What is the potential for development of the pangasius export industry of

VINH HOAN Corporation in the coming years?

- Provide future business strategies with the expectation of sustainable

development in the international market within the next five years for VINH HOAN
Corporation?
 1.3 Scope and limits

This study was conducted and used only as reference information for VINH
HOAN Corporation Company, not for other companies in the seafood industry.
II. LITERATURE REVIEW AND METHODOLOGIES
2.1 Literature review.

It takes four steps to perform business analysis and valuation of a firm including:

The First step is business strategy analysis. The second is accounting analysis. The
third step is financial analysis. And the last one is a prospective analysis

2.1.1. Business strategy analysis

Business strategy analysis is a useful tool to identify key profitability for the
industry in general and the enterprise in specific. Moreover, it also determines the
risks and the potential growth of the firms. Business strategy analysis involves
analyzing a firm’s industry and its company analysis.

2.1.1.1. Industry analysis

a. Porter’s Five Forces Model:
Is a model that identifies and analyzes the five competitive forces in every
industry and helps to identify industry strengths and weaknesses.

Used to define the structure of an industry to determine a company's strategy,

Porter's model can be applied to any segment of the economy in search of profitability
and attractiveness. In addition, assess the competitiveness and position of an
organization in its operating environment.

This model is built on the assumption that there are 5 industry environmental
forces, helping us to understand the current competitive position of the organization
and the position the organization aspires to be in the future.

Five industry environmental forces:

 Figure 1. Five industry environmental forces

Bargaining Power of Suppliers: the inputs to the organization are assessed by

how easily suppliers are able to "squeeze" prices. This is determined by factors such
as the number of suppliers, the differentiation of products or services, the size and
strength of the supplier, and the cost of moving from one supplier to another.

Bargaining Power of Buyers: is measured by how easily the customer can

pressure or reduce the price of a product or service that the organization offers.

This is dictated by the number of customers, the importance of the customers,

and the cost for a customer to move from one supplier to another.

Rivalry among existing firms: in many respects will be a leading important

force determining the level of competition in that industry.

The main determining factor is the number and capacity of competitors. If in

an industry or field many competitors are offering the same products or services, the
attractiveness of that industry/field will decrease.

Threat of Substitute products: Substitute products are regarded as those

things that can be easy to replace for another one but still satisfies the demand of
customers. Substitute products create pressure on the potential profits of an industry
because the company may set up an impressively good price to prevent the penetration
of other substitute products that lead to lower profit. The fewer the number of
substitutes products are, the greater the opportunity for the firms in the industry to
raise their product prices to earn high profits.

Threat of new entrants: is always a factor to consider. Many times the

competitive balance can be completely changed when new competitors appear. An
attractive industry will attract many potential competitors, requiring the organization
to have solid barriers to entry, such as advantages of scale, patents, large capital
requirements, or government policies.

2.1.1.2. Company analysis

a. PESTEL model:

The PESTEL model is an extremely useful strategic tool to help us understand

the growth or decline of the market as well as help us understand the business
position, opportunities, and direction for business activities.

The PESTEL model is a type of analysis that looks at six important business
factors:

Politics (P): Politics has a significant impact on business operations and

consumer spending power.

Economic (E): Market analysis should assess the business situation in both
the short and long term.

Social (S): Social factors affect businesses at various levels, and should be
carefully considered.

Technology (T): Technology is often identified as an essential element of an

organization because it is a useful tool for gaining an advantage in the marketplace.
Technological progress can create new industries, and also provide valuable inputs to
service and manufacturing industries.

Environment (E): These factors include all those that affect or are determined
by the surrounding environment. This factor is important for a number of industries,
especially tourism, agriculture, agriculture, etc. Elements of business environment
analysis include but are not limited to climate, weather, geographical location, global
changes in climate, environment, etc.

Legal (L): These factors are both external and internal. There are certain laws
that affect the business environment in a certain country while there are certain
policies that companies maintain for themselves. The legal analysis takes into account
both of these angles and then outlines strategies according to these regulations. For
example consumer laws, safety standards, labor laws, etc.

Figure 2. Pestel Model

b. Analysing Firm Capabilities

Capability analysis is one of the critical tools in any strategic analysis. It is the
primary tool for analyzing the internal capabilities of an organization. Identifying the
value chain and specific resources and capabilities. Assessing the alignment of
capabilities both internally and externally. Determining the degree to which any
capability advantage is sustainable over time.

The Role of Firm Capabilities:

- The Resource Based Perspective.

- Premise that firm capabilities matter most.
- Economic rents due to barriers to imitation (i.e. Ricardian rents).
 - Some firms are more profitable than others.
c. Competitive position

The size and position of each business in the industry will determine its
strategy. All businesses need to come up with effective positioning strategies against
competitors in the market. The goals of the marketing system dictate what the
marketing activities of the business must achieve through its marketing efforts. The
marketing strategy of the enterprise must identify the means and solutions to achieve
the set marketing objectives.

According to Michael Porter, three basic approaches underlie strategic

thinking is:

Price leadership: the company focuses all its efforts on achieving the lowest
production and distribution costs, can set prices lower than its competitors, and
achieve a large market share. Businesses pursuing this strategy must be good at
product supply, manufacturing, and distribution techniques, and marketing.

Create a differentiating feature: The business focuses on creating a unique

product and marketing program, creating customer satisfaction is an important benefit
area assessed by the market. Enterprises strive to take the leading position in terms of
service, quality, design, or technology, etc.

Concentration: The business focuses its efforts on serving a few market

segments rather than pursuing the entire market. The business must understand the
unique needs of each target market and strive to create a low-cost leadership position
or some other distinctive feature in that target market.

A business can occupy one of six competitive positions in the target market:

Dominion: Firms control the behavior of other competitors and can choose
from many different competitive strategies.
Strong: The business can act independently without jeopardizing its long-
term competitive position and can maintain it regardless of competitors' actions.
 Weakness: The business does not achieve the desired results but still has the
opportunity to find a way to change the situation, otherwise it is forced to withdraw
from the market.
Advantages: The enterprise has a strength that can be exploited in specific
strategies and has a good opportunity to develop its position.
Sustainability: The firm achieves its business objectives but its existence is an
obstacle to the dominant market firm and it has little opportunity to improve its
position.
Inability to survive: The enterprise has poor business results and has no
opportunity to improve its position.

d. International strategy

Is a competitive strategy to increase profits by transferring and exploiting the

superior products and skills of the enterprise in foreign markets. Products are
designed, developed, manufactured, and sold in the domestic market and then
exported abroad with negligible adaptations or products are designed entirely in the
country, while the production and consumption are assigned to foreign branches for
implementation.

Applicable object:

Suitable objects: businesses dealing in products with popular demand but no,
or very few, competitors, pressure to reduce costs and pressure to adapt to the locality
are small.

Unsuitable subjects: enterprises with high adaptive pressure, high local

response pressure, and manufacturing industries where there is high pressure to reduce
costs.

e. Diversification strategy

Diversification strategy is to create diversity in the fields and business lines in

which the business is engaged.
 The role of the strategy:

Spread risk across different lines of business.

Makes sense if it increases the benefit to the owners more than the benefit
they get from the independent investment. Therefore an industry/sector selected for
diversification must be attractive enough to return high-profit margins and support
more business areas than independent businesses.

2.2 Methodology

Business analysis and valuation for Vinh Hoan Joint Stock Company (VHC) are
carried out using available financial data and other information publicly available on
the company's website and Rong Viet Securities Joint Stock Company. This study
uses both quantitative method count and quantify.

This study was conducted in 3 steps: Analysis of business strategy. Financial

Analysis. Prospect analysis.

Step 1: Business strategy analysis is a qualitative approach. Industry analysis

uses Porter's five forces to understand the industry in which VHC operates and get an
overall picture of where VHC is. Competitive strategy is used to find out the overall
strategy that HVC implements and how that strategy affects the financial performance
of VHC.

The quantitative approach is financial analysis and future analysis.

Step 2: The financial analysis is assessing the VHC’s operation by analyzing the
financial statement to see how well the VHC captures the target strategy. The
percentage change analysis and ratio analysis will be applied in this section. The
percentage change analysis shows the general view on the VHC’s performance, while
ratio analysis is used to understand the VHC’s operation in detail through liquidity
ratio, profitability ratio, efficiency ratio, and leverage ratio.
 Step 3: In the prospective analysis, the above strategy analysis and financial
analysis will help to forecast the financial performance of VHC in the future. For the
forecasting process, the pro format financial statement will be made for five years
(2021-2026). For the valuation, the discounted cash flow (DCF) method based on free
cash flow to the firm is the appropriate tool because FCFF is a measure of financial
performance that expresses the net income plus depreciation plus interest expense and
subtract capital expenditure and working capital investment and FCFF show the
obligation for both stockholders as well as bondholders whereas FCFE just considers
only the obligation for stockholders. Actually, FCFF and FCFE have some advantages
and disadvantages, but the FCFF is suitable for the company if the capital structure
does not change. This model is widely accepted in Vietnam because this method
reflects the value of the company based on its potential growth.
III. INDUSTRY, COMPANY AND STRATEGY ANALYSIS
3.1. Industry analysis
3.1.1. The global whitefish (Pangasius hypophthalmus) industry.

Kontali data shows that global supplies of wild and farmed whitefish will
increase by a total of 3.7% in 2021 - down slightly from Kontali's initial forecast of
5% released in November. 2020. Aquaculture is expected to generate most of the
growth this year, Nystatin said, with a production increase of 520,000 tonnes of the
species included in Kontali's survey. Among farmed species, the recovery of
pangasius is the most obvious, production will be 300,000 tons higher than in 2020,
mainly due to China and Vietnam boosting production. Such growth would offset a
drop of nearly 200,000 tonnes in global catfish production from 2020 (bottom).

In the Chinese market: At the end of the second quarter and the beginning of
the third quarter, activities to this market became more bustling in preparation for the
National Day of China. In October 2020, the export price of frozen pangasius fillets to
China - Hong Kong suddenly increased to 2.52 USD/kg, this is a higher price
compared to the same period last year and much higher than other months. during the
year, ranging from 1.55 to 1.65 USD/kg. This price is lower than the previous quarter.

In the US market: Prices of most seafood in the US have increased sharply

since the beginning of the year. Among the top 10 popular seafood products in the US,
frozen pangasius fillets of 5-7 oz are the product with the 4th highest price increase,
up 35% from 1.73 USD to 2.33 USD/pound after. 6 months from the beginning of
2021.

In the European market: the retail price for 1 kg of frozen pangasius fillet is
€5.38, including 9% VAT. Excluding VAT, the retail price will be €4.94. The profit
margin for the retailer is around 45-55%. For importers, the profit margin is about 10-
15%. The factory price will be around €3.19. (diagram below). ( Report of Kontali).
 Figure 3. GLOBAL WHITE FISH SUPPLY (Thousands of Tons).

3.1.2 Domestic industry analysis

According to the report of the Directorate of Fisheries, in 2020, the total area
of pangasius farming in the Mekong Delta is estimated at 5,700 hectares and the total
harvest is estimated at 1.56 million tons. In 2020, pangasius seed production in
localities in the Mekong Delta will be stable. The whole Mekong Delta region has
about 120 pangasius hatcheries (which keep broodstock), nearly 4,000 ha of pangasius
rearing; produced about 2 billion pangasius fingerlings (equivalent to 100% compared
to 2019); has replaced 60,000 thousand selected broodstock, so the quality of
pangasius seed has been gradually improved. Pangasius is increasingly popular in the
world thanks to its nutritional value. In 2020, Vietnam will export pangasius to 138
markets. Top 8 main markets include: China - Hong Kong, US, ASEAN, EU, UK,
Mexico, Brazil and Colombia, accounting for 80.4% of total export value. (Report of
the Directorate of Fisheries, 2020).
 Figure 4. Figure for TOP 5 EXPORT MARKET (Pangasius hypophthalmus) of
VIETNAM 2015-2019 (USD million)

Table 1. Area and output of pangasius 2015-2020

3.1.3 Porter 5 forces analysis

Threat of new entrants:

The risk of competitors in the same industry such as Minh Phu Seafood
Corporation (MPC), Sao Ta Food Joint Stock Company (FMC). According to the
Vietnam Association of Seafood Exporters and Producers (VASEP), from 2020 to
February 2021, Minh Phu Company's revenue in the first quarter of 2021 is VND
2,809 billion, accounting for 50% and a customer network strong and has a higher
market share in the US. For Sao Ta Food Joint Stock Company (FMC), in the first
quarter of 2021, the company's net revenue increased by 36% over the same period
last year, reaching VND 969 billion, FMC's market is more diversified, with Japan
contributing contributed 28% of revenue, EU 29% and US 26%. In addition, the fish
lines that directly compete with pangasius face many great disadvantages, for
example, the supply of cod is expected to decrease sharply and the price of tilapia
imported to the US from China will be subject to tariffs. 25% new. Therefore, Vinh
Hoan Seafood still maintains a good growth momentum in the US, which is a
particularly important export market for the company when accounting for nearly 70%
of total revenue and recording export turnover up to 63%. Especially, thanks to its
reputation in the US market, Vinh Hoan seafood has been selected by Alibaba as a
supplier to the Chinese market. (Report of VDSC, 2020).

Bargaining power of buyers:

Exporting is a big problem for the pangasius industry. The power of

customers decides that is a large proportion, they not only have very high
requirements for fish quality and cleanliness but also very strict. Typical for customers
in the European market, where consumers care most about sustainability, price and
convenience. The majority of pangasius is brought into Europe as frozen fillets and
Vietnamese exporters account for the majority of the market share. Most pangasius
products are supplied through importers and wholesalers and eventually retail and
food services throughout Europe. Please ensure that your products are correctly
handled and labeled and follow all required market requirements, or they may be
rejected at the border or unsold. They do not allow treating your pangasius with
carbon dioxide for the European market and to control the chlorate content of the
product, they are required to have a hygiene certificate with the product. Ask your
logistics forwarding agent for a hygiene certificate. This is mandatory for all seafood
products, especially pangasius. Excessive chlorate levels in foods can pose health
risks to consumers, especially for at-risk groups. The most commonly required food
safety certifications for seafood products are IFS (International Characteristic
Standard) and or BRC (British Retail Consortium).If you choose the retail sector
(North) Europe is the final market. Other parts of Europe and end markets are
increasingly demanding sustainable certified pangasius. The Aquaculture Stewardship
Council (ASC) certification is the most widely used sustainability certification in this
market.

Bargaining power of supplier:

The danger from suppliers is great, especially under the great influence of the
covid pandemic in the last 2 years. Quoted by Ms. Truong Thi Le Khanh - Chairman
of Vinh Hoan Joint Stock Company, said that with pangasius farming areas, the
boundary is a river with a river, sometimes a dune is also the boundary of two
provinces. But with different management, it will dominate, making it difficult to
move, even within the province, but there are barriers between districts. workers do
not want to do. A trade union team to catch fish fingerlings has dozens of people, but
they have to quarantine for 14 days when they go back to harvest only one fish pond,
so they don't do it. Even the technical staff went to buy fingerlings, even though they
had 2 vaccinations, they had to be isolated for 14 days, so it was blocked, leading to
the prospect that next year there would be a shortage of seed. Breeders can't take care
of them comfortably, harvest is difficult, so they don't stock anymore. This is a great
difficulty and hinders the supply to Vinh Hoan company.

Threat of Substitutes:

The tilapia export industry is no less competitive than pangasius, the risk of
substitution is great. Food source, habitat, fish meat quality can be considered quite
superior to pangasius. According to SeaSpiMex, Tilapia is widely consumed in
markets such as Central and South America, targeting North America and China.
Country. Tilapia ranks fourth in the list of the top 10 most consumed seafood species
in the United States. Consumption volumes continue to grow as local food and value-
added product designs now develop new technologies to make tilapia an option for
everyday food sources. Frozen Tilapia fillets in pieces (IQF fillets) are the main
products demanded by importers.

In Europe, pangasius competes with other white fish, such as tilapia and
Alaska pollock. However, the most important substitutes for pangasius differ across
Europe.

In countries such as Germany and Poland, Alaska pollock is the main

competitor for pangasius, while in the United Kingdom, consumers favor cod and
hake species, commonly used for fish and Traditional french fries. In Southern
European countries, hake, Alaska pollock and other white fishes compete with
pangasius. As a pangasius supplier, be aware of these differences in the European
market.

Degree of rivalry:

The leading competitor in Vinh Hoan's pangasius export industry in Vietnam

can be mentioned companies in the same industry such as Hung Vuong Joint Stock
Company (Hung Vuong Corp), An Giang Seafood Import Export Joint Stock
Company (Agifish). , Viet An Joint Stock Company (AnVifish Co), Nam Viet Joint
Stock Company (Na Vi Co), Nha Trang Seafood Joint Stock Company (F17), Dai
Thanh Liability Company (Tien Giang).

Vinh Hoan's competitors in the world:

In the European market: Competing with Germany and Poland as pangasius

suppliers to Central and Eastern European countries, where there are no large import
ports. According to statistics, nearly 51.4 million USD of frozen pangasius fillets were
re-exported within the EU in 2017. The main re-exporting countries of pangasius are
the Netherlands (31 million euros), Belgium (14 million euros). and Germany (8
million euros). Weak points for Vinh Hoan are Germany and Poland, Alaska pollock
is the main competitor of pangasius. Meanwhile, the UK market has a selection of
haddock and juvenile fish products with a menu of other traditional products and
chips. In Southern European countries, pangasius has to compete with hake fish,
Alaska pollock, and some other white fish products.

In the US market: Vietnamese pangasius is facing competition with tilapia

from China - a seafood species that is considered a substitute for pangasius, when the
US is increasing the amount of imports of this fish. The reason is that Chinese small
tilapia products (no more than 115g/fish) are exempt from 25% tax when exported to
the US market from March 26, 2020. (Report of VDSC, 2020)

3.2 Company analysis

3.2.1 Company overview:

The predecessor of Vinh Hoan Joint Stock Company (VHC) is Vinh Hoan
Company Limited, established on December 19, 1997. In 2007, the company
transformed into a joint stock company with the name Vinh Hoan Joint Stock
Company. The company has the advantage of raw material supply because it is
located in Dong Thap province, a province in the Mekong Delta region with an
environmentally friendly environment. The market and conditions are considered to
be the most favorable for the pangasius farming industry, with 8 pangasius farming
areas, total area 136.5 ha, providing 34% of raw material needs. The Board of
Directors includes Chairman of the Board of Directors Ms. Truong Thi Le Khanh.
Members of the Board of Directors include Ms. Nguyen Ngo Vi Tam, Mr. Vo Phu
Duc, Ms. Truong Tuyet Hoa, Ms. Phan Thi Kieu Oanh, Ms. Nguyen Thi Kim Dao.
The independent member of the Board of Directors is Mr. Nguyen Van Khanh. In
charge of administration is Ms. Phan Thi Kieu Oanh. Vinh Hoan Company operates in
the following fields: domestic aquaculture; processing and preserving aquatic products
and aquatic products; purchase and sale of aquatic products, purchase and sale of
machinery, equipment, supplies, chemicals, agricultural products and food, energy
products, raw materials for the production and processing of aquatic products and
aquatic feeds; Producing and trading animal, poultry and aquatic feed, veterinary
medicine, aquatic products. Aquatic veterinary services (consultation on the use of
drugs, feed and aquaculture techniques); Trading in eco-tourism services; producing
paper packaging and printing all kinds of packaging; Building houses of all kinds,
trading real estate.

Achievements acquired:

Achieving certain success when Vinh Hoan has added 5 new markets, namely
Pakistan, Thailand, India, Greece and Reunion, increasing the customer network to
about 300 customers in more than 40 countries. The outstanding growth was Japan,
China and Mexico with respective increases of 60%, 135% and 80% respectively.
Especially, successfully bringing products with Vinh Foods brand into the largest
Mercadona supermarket chain in Spain.

Record level of profit: increased by 76% and exceeded 62% of the set plan
and led in the number of certified farming areas in Vietnam with the area certified by
Aquaculture Stewardship Council (ASC), Best Aquaculture Practices (BAP), Global
Good Agricultural Practice (GlobalGAP) reached 140 ha, 155 ha, and 180 ha,
respectively; 2016 expansion rates reached 100%, 88%, and 93%.

3.2.2 PESTLE model of Vinh Hoan Group

The PESTLE model stands for Political, Economic, Sociocultural,

Technological, Environmental, Legal.

Political: Vietnam is a country that is politically stable both at home and

abroad, with almost no violence, a stable currency value and government laws on the
pangasius industry. Raising, processing and exporting pangasius products has been a
key economic sector of the Mekong Delta for more than a decade and has contributed
to making Vietnam the largest pangasius exporter in the world. However, this industry
is facing many difficulties and new challenges from changes in natural conditions to
increasing trade barriers of importing countries and competitive pressure. Facing the
above situation, in the past, the Government has developed and issued many policies
to support the pangasius industry to develop sustainably. In addition to the
establishment of the Vietnam Pangasius Association (established on January 3, 2013),
Decree 36/2014/ND-CP dated April 29, 2014 of the Government has had certain
positive impacts. , helping to strengthen the development of this industry.

Economic: Vinh Hoan (VHC) has just announced the consolidation of the
second quarter and the first 6 months of 2021, Vinh Hoan's quarterly sales revenue
reached VND 2,344 billion, up 38% over the same period last year, accumulated 6
months reached 4,134 billion VND, up nearly 24%. The company's profit this quarter
increased by 16% compared to the same period last year due to the decrease in cost of
goods sold, however, the figures in the financial statements show that the gross profit
margin of the company in the second quarter of 2021 was only 18.5. % decreased
slightly compared to 19.5% in the same period last year. Accumulated in 6 months,
the figures are 17% and 16.4% respectively. As a result, the consolidated pre-tax
profit in the second quarter of 2021 of VHC reached VND 302 billion, an increase of
nearly 20% over the same period last year, accumulated for 6 months. reached 454
billion dong, up 7%. Consolidated profit after tax and net profit in the second quarter
of 2021 reached 261 billion dong, up 16% over the same period last year and was the
most profitable quarter in the last 7 quarters. Accumulated 6 months of consolidated
NPAT reached VND 392 billion, up slightly by 4% in the same period of 2020. EPS
of 6 months was VND 2,152. Faced with the difficult situation during the COVID-19
pandemic, VHC, with its well-established business value chain foundation, strong
financial position, and possessing a competitive advantage over similar businesses,
The company recorded lower impact business results compared to the overall negative
picture of the whole industry. Lead to Socioculturalism is also affected. (Report of
VDSC, 2021)

Technological: Vinh Hoan's signature Collagen and Gelatin arrays continue

to achieve high growth rates. In the second quarter of 2021, C&G segment recorded a
23% increase in revenue over the same period and accounted for about 38% of profit
after tax belonging to VHC shareholders. Vinh Hoan will quickly utilize the full new
capacity thanks to its small global market share (<1%) and high demand for seafood-
based Collagen & Gelatin. It is estimated that the C & G segment will contribute 36%
- 37% to shareholder's profit after tax by the end of 2021. (Report of VDSC, 2021)
 Environmental: VHC located at the location where the Mekong River flows
into the sea is an ideal environment for pangasius farming with abundant fresh water
and warm temperatures all year round. Favorable natural conditions along with long-
term farming experience make the productivity and quality of Vietnamese pangasius
superior to other competitors. In terms of quality, Vietnamese pangasius meat is white
and contains little tannin, while pangasius meat in other countries is yellow and rich in
tannins. Higher productivity helps Vietnamese pangasius exporters offer more
competitive prices than businesses from India, Bangladesh and Indonesia.

Legal: VHC enjoys a great advantage with the anti-dumping tax rate of 0%
set by the US Department of Commerce, while other Vietnamese pangasius exporters
are subject to anti-dumping tax from 1.17-3, USD 87/kg according to the final result
of the 14th anti-dumping duty review (POR14). Unlike other competitors, VHC has
the above advantage because the company focuses on product quality instead of price,
which reduces the risk of depending on anti-dumping tax. In addition, Vietnam has
signed the EVFTA agreement on tariffs on seafood products to be immediately
eliminated tariffs, including the EU will eliminate tariffs for Vietnam according to a 3-
year roadmap, from the basic tax rate of 18%. for loin/fish fillet products.

3.2.3. Capability

VHC has always been in the leading position in the ranking of the largest
pangasius exporting companies in Vietnam in the past 10 years, while there has been a
great fluctuation in the top 4 enterprises. In 2020, VHC is autonomous about 60% -
65% of the source of raw pangasius and has very little control over risks. VHC also
has a long-standing customer network in the US and enjoys an anti-dumping tax of
USD 0/kg, giving VHC a great advantage in this market. VHC is currently the
business with the healthiest financial position in the industry and especially Collagen
and Gelatin are the special factors that help VHC be a business that makes a
difference compared to other businesses in the same industry.
 3.2.4 VHC’s Strategy analysis

The Covid-19 pandemic has caused many serious impacts to the global
pangasius industry in general and VHC in particular. Therefore, VHC's business
strategy in 2021 is developed as follows:

In 2021, the Company will invest in 3 main projects, namely building an

animal feed factory, Vinh Hoan hatchery and owning land for the complex, with a
total investment capital of about 1,900 billion VND. expenditure in 2021 is 700 billion
dong. In addition, VHC also spends VND 200 billion on renovating factories in Thanh
Binh and Vinh Phuoc Foodstuffs. Other investments are about VND 400 billion. Total
investment capital to be spent in 2021 is about 1,300 billion VND.

In the 2 months of the third quarter (July and August) of 2021, despite the
difficult context (aquaculture factories only operate at 50-60% of capacity due to the
social distancing directive and three place), VHC's push to export pangasius to the US
still showed a positive growth with a sharp increase in export prices: turnover reached
51.4 million USD, output reached 15.4 thousand tons, export price reached 3.34
USD/kg .

VHC has started the construction of a hatchery in Vinh Hoa - An Giang

dunes, expanded the production line at Vinh Hoan Collagen factory, built 2 cold
storages with a capacity of 20,000 pallets and a fish oil refinery, acquired 51% shares
of Sa Giang Import-Export Joint Stock Company (SGC). In 2021, VHC also plans to
support sales growth in Sa Giang, combining the existing sales networks of VHC and
SGC, thereby increasing revenue from the business of shrimp crackers and products
from rice for both domestic and export markets. Besides, Vinh Hoan also started to
return to the aqua feed production industry through the establishment of FEED ONE
Aquatic Feed Co., Ltd. and will build an aqua feed processing factory to be completed
by the end of the year. 2021. (Report of VDSC, 2021)
IV. STRATEGY
4.1. Vietnamese macro policy
4.1.1 The Vietnamese strategy of seafood from 2030 to 2045

The draft Strategy sets a target that by 2030, the growth rate of fishery value
will reach from 3.0-4.0%, the fisheries economy contributes 28-30% of GDP in the
structure of the agricultural sector. Total fishery production reached 10 million tons,
of which capture fisheries production reached about 25-30%, aquaculture production
reached 70-75%. The value of seafood export turnover reached 18-20 billion USD, of
which exports on the spot, through tourism and international visitors were about 1.3
billion USD. At the same time, creating jobs for over 3.5 million workers, with the
average income per fishery worker equivalent to the average income of the whole
country. (The Vietnamese Agriculture and rural development, 2021)

By 2045, seafood will be a large commodity production industry with modern

management, science and technology, strict compliance with international institutions,
responsible and sustainable development. Strive to create jobs for an additional 3
million workers. Becoming a center of high quality seafood processing in ASEAN and
Asia, in the group of 3 leading seafood producing and exporting countries in the
world.

In order to realize future development expectations, the fisheries sector also

needs to pay attention to the policy of converting fishermen's near-shore fisheries to
developing marine aquaculture, thereby both protecting and regenerating resources.
nature, while developing the profession in a sustainable way. Along with that, it is
necessary to have a chain link strategy and product consumption; ensure from the
input seed stage, production process and product consumption. In addition, Vietnam is
still making efforts to thoroughly implement its commitment to combat illegal,
undeclared and unregulated (IUU) fishing with the goal of removing the EU yellow
card, for the sustainable development of the industry. fishing and seafood processing.
Recently, the Ministry of Agriculture and Rural Development has issued Directive
No. 49/CT-BNN-TCTS dated January 6, 2021 on strengthening the management of
fishing vessels, ensuring safety for people and fishing vessels operating and Decision
No. 214 / QD-BNN-TCTS dated January 14, 2021 on Announcement of a list of
designated fishing ports that have sufficient systems to confirm the origin of fishery
products as a basis for verifying the origin of legally caught fish according to
regulations. IUU determination. By successfully removing the EC yellow card,
Vietnamese seafood will be able to strengthen and enhance its brand and reputation in
the international arena, saving costs, time, and reducing procedures.

4.1.2 The impact of CPTPP and EVFTA

In addition, a bright spot for Vietnam's trade in general and for the seafood
industry in particular is the fact that on January 14, 2019 and August 1, 2020, two
large-scale free trade agreements were signed. The effective CPTPP and EVFTA
promises to bring new opportunities in tariff for Vietnam's export products, including
seafood. Most recently, on November 15, 2020, Vietnam signed the Regional
Comprehensive Economic Partnership (RCEP) to join the largest trading bloc in
history with a market of more than 2.2 billion people. accounts for 30% of the total
world product. RCEP will enter into force for the next 2 years after being ratified by
member states. Through this, Vietnamese seafood has the conditions to consolidate
and increase its strength and competitiveness through the use of cheaper production
support services, expand the market as well as overcome some challenges in terms of
barriers. technical, commercial protection. By 2030, seafood exports will reach 20
billion USD

According to the Institute of Fisheries Economics and Planning (Ministry of

Agriculture and Rural Development), the fishery industry will develop in the direction
of modernization, machines and technology will replace manual labor. Therefore, in
the draft industry development strategy, the number of 3.9 million employees at the
present time will decrease to 3.5 million in 2030 and by 2045 will only 3 million. The
number of dismissed employees will be retrained to change jobs.4.2 Corporate Policy
 4.2 Corporate Policy
4.2.1 The effect of Covid-19

• Revenue from selling pangasius increased however, in contrast, collagen &

gelatin (C&G) revenue was flat in 1H2021 reaching VND312 billion. According to
VHC, C&G's second production line is currently running at only 10-15% of design
capacity. In our view, the reasons for this low growth are:

1) Weak demand for premium products amid COVID-19

2) Customers have temporarily switched to cheaper products such as bovine

and porcine collagen

3) The shortage of containers slows down C&G's export orders.

Operating a new collagen factory, promoting strong growth: VHC plans to

expand its C&G segment with a new factory that will increase capacity from 2000
tons to 3500 tons/year. According to our exchange with the enterprise, the old factory
is almost at full capacity, many orders have to be canceled so the output for the new
factory is not too much of a concern. This new factory also develops higher product
lines such as nano collagen with gross profit margin that can be up to 50-60%.

Currently, the C&G segment is contributing about 180 billion dong in profit
in 2019, which is expected to increase to 250 billion dong this year and break through
to 400-450 billion dong in 2021, which will be the key to boosting profit and share
price for the company. (Report of VDSC, 2021)

4.2.2 Strategies for perfecting raw materials

Currently, the cost of raw materials is the main cost in production and
business of VHC: The self-control of seed will be the key factor for competitiveness
in terms of quality and efficiency for VHC, 200 hectares of high-tech projects.
Production costs tend to decrease due to the closed process bringing high efficiency
from seed, feed to disease control for VHC's farming area, which is widely divided in
many provinces and regions. variety to help minimize weather and disease risks,
mainly located in Dong Thap, Tien Giang, An Giang, Ben Tre, and Long An areas.

The autonomy of about 2/3 of pangasius raw materials gives VHC a lot of
advantages to help reduce risks:

• With the price of pangasius having dropped sharply since 2018, currently,
for each kilogram of pangasius, farmers are suffering a loss of about 4,000. Therefore,
VHC can completely promote outside procurement to reduce costs and at the same
time reduce the loss burden of the farming segment.

• When pangasius prices recover, VHC can also expand farming sources to
increase the self-sufficiency rate of raw materials, taking advantage of high fish
prices.

Figure 5. Vinh Hoan enterprise value chain

4.2.3 Deep processing strategy

Sa Giang - Vietnam's largest shrimp puff pastry maker was acquired by VHC
for 76.72% in early 2021, recording revenue of VND 145 billion, contributing 3.5% to
VHC's revenue. Shrimp cake sales accounted for 76% of SGC's revenue and the rest
was from rice related products. In the long term, SGC will expand its business in the
future, in order to achieve a higher profit margin than the shrimp crackers segment.
(Sa Giang Company, 2021)
 In fact, SGC is a company specializing in Sa Dec shrimp specialty crackers.
With the trend of deep processing of pangasius and catfish products into instant food
or using by-products to supply processed food industry chains, SGC will be the
perfect "opening step" for VHC on the domestic market. A VHC with pangasius puff
pastry products, similar to Hau Giang's pangasius puff pastry that is taking the market
by storm seems to have begun to be predictable.

With the year 2000, pangasius products exported in 2010 to more than 30
types: from whole, cut, fillets to sliced breaded and fried, sliced frozen seasoned,
shrimp and pangasius wrapped with potatoes, skewers, pangasius wrapped with
salmon , grilled pangasius, breaded with frozen "beer batter", breaded with frozen
"Western style"... Compared to seafood export groups, the diversification of pangasius
export products is difficult. Therefore, in order to "refresh" products, enterprises have
combined pangasius with other vegetables and seafood (salmon, shrimp, etc.) or
soaked in a variety of spices according to the tastes of each market. In 2010, processed
pangasius products (under HS16 code) accounted for 0.75% of total export
value.More than 70% of VAT products were exported to the EU market such as the
Netherlands, Switzerland, Germany, etc. other markets such as: Australia, Singapore,
Philippines, Pakistan...

Although we have tried to diversify products by making the most of main

products to by-products, preparations (fish skin, stomach, bubbles, fat, shredded meat,
getalin ...), or a combination with vegetables, aquatic products, marinated with spices
to produce new products, but the proportion of value-added goods still accounts for a
very small proportion in the total export value.

Basa burger, Marinated butterfly; Marinated fillet… right at the Vietnam

factory. If these combined projects are successful, many pangasius processing
enterprises will have more opportunities to increase processed products in the export
structure.

As reflected by pangasius export enterprises, the innovation of export

products so far is still due to requirements from the market, customers or the
enterprises themselves create and explore. But due to the weak promotion and brand
development of the State in foreign markets, the marketing strategy and persuasion of
customers are not high, so many new products that have been piloted have not been
really successful. Moreover, in the current difficult context, the price of value-added
goods is higher than that of frozen goods, so few partners place orders or small,
irregular orders. Meanwhile, the high cost of production, labor in production, and
market exploration make unprofitable businesses.

Figure 6. Revenue results in May 2021 of Vinh Hoan (excluding Sa Giang) compared
to the same period last year.

4.2.4 Strategies to develop safe products for health

Collagen & gelatin segment - Weak demand and stiff competition amid
COVID-19

In 2021, the C&G segment will face weak demand for high-end beauty
products due to the global COVID-19 outbreak, according to VHC. In the longer term,
we are optimistic about the outlook for collagen demand due to the growing global
awareness of health consciousness driving the consumption of nutritional products
after the pandemic. According to Research Dive, the global collagen market is
predicted to grow at a CAGR of 8.1% between 2021-2027 to reach $1.2 billion by
2027. VHC can rapidly expand the segment C&G thanks to: (1) small global market
share (< 1%); (2) shifting consumer preference to fish collagen due to its more
efficient absorption and metabolism than bovine and porcine collagen and (3) the
selling price of fish collagen is much higher than others due to its outstanding
biological performance. Therefore, we forecast VHC's C&G revenue and EAT will
grow at 18% and 20% CAGR respectively in 2021-2025F, reaching VND1,285 billion
in revenue and VND500 billion in EAT in 2025. (Report of VDSC, 2021)

In 2016, Vinh Hoan only exploited a small number of potential customers.

Therefore, the production and consumption of collagen and gelatin must be calculated
in the long run, not as quickly as pangasius or shrimp.

Looking at this gelatin and collagen collagen market growth rate, with an
average annual rate of 9.4%/year and forecast to reach USD 11.15 billion by 2025,
there are many reasons for Vinh Hoan to place a lot of orders. big ambition.

Firstly, up to this point, Vinh Hoan is still the only company in Vietnam that
produces collagen extracted from pangasius sources that are actively sourced by the
Company. This ensures maximum material traceability requirements. Some other
enterprises have started to enter this market, but there are no raw materials.

Second, compared to collagen products extracted from other skin types, such
as cow skin, pig skin, etc., marine fish skin has high absorption, good bioavailability,
and low risk of disease transmission. In particular, this product has no religious
barriers, especially in Muslim areas, so the market is very wide. Meanwhile, Vinh
Hoan is exporting 100% of its products.

Third, the main raw material area is pangasius, Vinh Hoan has ranked first in
the country for 6 years now. In the recent General Meeting of Shareholders of Vinh
Hoan, the company announced that it had expanded its autonomous farming areas
from 55 - 60% to nearly 65%, so the cost of raw materials was also significantly
reduced compared to the previous year. last year.
V. FORECASTING

Vinh Hoan's business results forecast for the third quarter of 2021, with sales of
2,249 billion dong and profit after tax of 233 billion dong, up 25% and 33%
respectively over the same period last year.

In which, owing to the influence of social distance, income from the pangasius
fillet category climbed by 30 percent over the same period, leading to a 24 percent
increase in average selling price, but output only increased by roughly 5%.

For the whole year, Vinh Hoan's revenue will be at VND 8,771 billion, profit
after tax is about VND 872 billion, up 25% and 24% respectively compared to last
year's results.

Vinh Hoan's gross profit margin is expected to increase to 19.1% (up 4.91
percentage points) thanks to the increase in output and average selling price of
pangasius fillets by 9% and 11%, respectively, offsetting the cost of production selling
and administrative expenses increased by 132%. (Report of VDSC, 2021)
 Table 2: Forecast of Q3/2021 business results

Billions dong Q3-FY21 +/- +/- (yoy)

(qoq)

Revenue 2.249 -4% 25%

Gross profit 472 9% 106%

EBIT 252 -11% 58%

Profit after tax 233 -11% 33%

Source: Report of VDSC,      

2021

The high selling price will offset the sharp increase in operating costs

In terms of exports, Vinh Hoan's pangasius fillet is predicted to be less

impacted by capacity reduction than that of small businesses, as the company's fillet
inventory is expected to be sufficient for exports in the next two months.

In general, VDSC predicts that the amount of fish fillets exported in the
second two quarters of the year will drop by 3% yoy to 41,310 tons. This amount is
expected to rise by 9% to 81,610 tons for the entire year.

Export volume is predicted to decline, while fillet prices are likely to rise,
resulting in a 21 percent increase in the company's gross profit margin.
 According to experts, the price of pangasius fillet is on the rise, having risen
by 31% year on year in the second half of the year owing to strong demand at the end
of the year, particularly in the US market, and a supply shortfall.

Logistics expenses, on the other hand, will continue to rise in the remaining
two quarters, rising by 164 percent year over year. As a result, experts predict that
Vinh Hoan's SG&A spending would rise by 169 percent this year and by 132 percent
overall. (Report of VDSC, 2021)

Table 3. Forecast of output and average selling price of pangasius by quarter of

VHC

  Q1- Q2- Q3- Q4- 2020A 2021F

FY21 FY21 FY21 FY21

Output (Tons) 18.200 22.100 20.160 21.150 74,925 81.610

% change svck 9% 42% 5% -10% 11% 9%

Average price (USD/kg) 2,84 2,94 3,32 3,41 2,82 3,12

% change svck -8% -3% 24% 39% -21% 11%

Pangasius export value 51,7 64,9 67,0 72,0 207,9 255,7

(million/USD)

% change svck 0% 38% 30% 25% -11% 23%

Source: Report of VDSC, 2021

Figure 7. Collagen amplitude (retail price) (USD/kg) and conversion rate (%) by type.

Figure 8. Forecast business results of C&G segment in the period of 2021-2025.

As a result, VHC expects its second C&G facility (which will begin
operations at the end of 2020) to operate at just 20% capacity in 2021. Furthermore,
VHC anticipates that fish-based C&G will compete with C&G from other low-cost
C&G like beef and pig, putting downward pressure on VHC's selling price. We expect
C&G output to grow 20% n/n in 2021, while the company's net margin will drop 340
basis points n/n to 39%. We also expect C&G's revenue and profit after tax to increase
by 16 percent n/n and 6 percent n/n in 2021, respectively, contributing 8% and 30% to
the company's revenue and profit after tax.

According to Research Dive, the global collagen market is predicted to grow

at a CAGR of 8.1% between 2021-2027 to reach $1.2 billion by 2027. VHC can
rapidly expand the segment C&G thanks to: (1) small global market share (< 1%); (2)
shifting consumer preference to fish collagen due to its more efficient absorption and
metabolism than bovine and porcine collagen and (3) the selling price of fish collagen
is much higher than others due to its outstanding bioavailability. Therefore, VHC
forecasts that VHC's C&G revenue and profit after tax will grow at 18% and 20%
CAGR respectively in the period 2021-2025F, reaching VND 1,285 billion in revenue
and VND 500 billion in profit after tax in 2025. (Report of VDSC, 2021)

Vinh Hoan's cost of capital is high in the period of 2021-2023

Vinh Hoan plans to invest 100 percent of its own cash in three new projects
by 2021, including a fish seed plant (VND 200 billion), a fish feed factory (VND 500
billion), and a farming complex. (1,200 billion dong), with the third project serving as
a long-term plan for the FMCG industry (fast-moving consumer goods).

The following projects' capital expenditures (CapPex) are expected to be

VND 600 billion this year, VND 900 billion next year, and VND 400 billion in 2023.

Specifically, Vinh Hoan will return to the animal feed industry after leaving
since 2014 with the "Feed One" factory with a capacity of 350,000 tons/year under
construction in Dong Thap province, expected to come into operation within the year.
2022 and break even after three years.

From VDSC's point of view, Feed One's goal is to improve the quality of raw
fish by developing its own feed formulation and optimizing production costs.
Therefore, Feed One will help reduce the cost of self-raised raw fish by 3% from the
end of 2022.

In addition, the Aquaculture - Fruit Complex will be Vinh Hoan's biggest

project in the long term. The fruit farm is currently piloting on a small area and
according to VDSC, this segment will not contribute to Vinh Hoan's revenue this year.
(Report of VDSC, 2021)

Some risks may be encountered by Vinh Hoan

The outbreak of the disease again caused the recovery process in markets to
be slower than expected.

The prolonged epidemic in the southern provinces caused operating costs

related to "3 places".
 With the export must use containers, the export market accounts for 80% of
annual revenue, VHC is significantly affected when the freight rate by container is
still high. Although the main export is through FOB (customers bear the shipping
cost), the gross margin is less affected. But revenue suffers when export volume is
lower.
VI. CONCLUSION AND RECOMMENDATION

The report was created for everyone to have an objective view of Vinh Hoan.
And this forecast and valuation help people better understand revenue results and
objectively evaluate the development of a Vietnamese seafood import and export
company like Vinh Hoan and why Vinh Hoan is one of the leading seafood import
and export companies in the world. Through this report, it can also help people make a
choice whether to invest in Vinh Hoan based on the valuation above or not.

The following is a recommendation if people are interested in investing in Vinh

Hoan:

Table 4. A recommendation if people are interested in investing in Vinh Hoan

Recommendation Buy Accumulate Reduce Sell

rate

Total return including dividends for 12 >20% 5% to 20% -20% to - <-

months 5% 20%

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33%. (2021). Retrieved 26 October 2021, from https://vietnambiz.vn/vdsc-vinh-hoan-
co-the-dat-loi-nhuan-233-ty-dong-trong-quy-iii-tang-33-20211003105420154.htm
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2021, from http://consosukien.vn/chien-luoc-phat-trien-nganh-thuy-san-trong-tam-
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ca-tra-viet-nam-58526.html

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VIETNAM SEAFOOD PROCESSING AND EXPORTING VIETNAM. (2021).
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What is the PESTEL model? - All about indispensable business analysis tools| ATP
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- International Business Strategy-IBS301m -Course 1: Foundations of BS -Session 8 -

10
https://classroom.google.com/u/0/c/Mzg3OTEwNDUxOTY2/m/
Mzg4NDcxNDYwMDM0/details