HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

FINANCIAL STATEMENT ANALYSIS
DONG PHU RUBBER JOINT STOCK COMPANY (DPR)

Lectures and Tutors: Mrs. Do Van Anh

Mrs. Trinh Thi Thu Trang

Students’ name Students’ IDs Contribution

1 Phạm Duy Anh 2004040011 100%

2 Trịnh Hoàng Anh 2004040016 100%

3 Nguyễn Thu Huyền 2004010053 100%

4 Phạm Công Thành 2004040096 100%

5 Nguyễn Thị Việt Trinh 2004010112 100%

6 Hoàng Phương Linh 1804040061 100%

 Abstract

Selecting one reasonable investment is always challenging for investors. The perception of
investment opportunity can be shaped by harnessing all available data including historical
data. Moreover, the most useful information mainly lies in the financial statement, an
essential source of consultation for investors. Beginning with identifying and interpreting
specific industry characteristics, quality of financial information, this report focuses on
analyzing the financial statement of Dong Phu Rubber Joint Stock Company (DPR). With the
provision of 3 consecutive years annual reports (2019-2021), my group aims to evaluate the
corporation in terms of industry, company and financial analysis. The recommendation for
investment is the result of forecasting the company's financial statement for the next period to
generate the company's intrinsic value. Several recommendations are offered in terms of
economic and financial criteria to aid all investors in determining the profitability of a
company's investment.
 Table of Contents
PART 1: INDUSTRY AND COMPANY STRATEGY ANALYSIS...................................1

I, Company background......................................................................................................1

II, Industry and economic environments analysis.............................................................1

PART 2: FINANCIAL ANALYSIS........................................................................................4

I, Liquidity analysis..............................................................................................................4

II. Profitability analysis........................................................................................................6

III. Solvency analysis...........................................................................................................8

PART 3: PROSPECTIVE ANALYSIS................................................................................10

I, Forecast the firm’s Financial Statements.....................................................................10

II, Firm’s equity valuation.................................................................................................25

PART 1: INDUSTRY AND COMPANY STRATEGY ANALYSIS

I, Company background
Dong Phu Rubber Joint Stock Company, formerly known as Thuan Loi Plantation
under Michelin Company - France, was established in 1981. The Company has its main
business in planting, exploiting, processing and trading rubber, lending industrial and
residential areas, and real estate operations. Dong Phu Rubber Joint Stock Company has an
area of over 10,000 hectares of rubber, with nearly 8,000 hectares of orchards being
exploited. DPR owns 06 rubber plantations with a total area of 9,817.86 hectares and 02
rubber latex processing plants with a total capacity of 22,000 tons per year. The Company's
rubber products are mainly for export for 86%. The Company's rubber products are
consumed in Europe (France, Belgium, Holland, UK, Spain, Slovakia...), Korea, China,
USA... and other domestic companies.
Regarding development investment, implementing a number of investment projects to
expand the scale and diversify production and business lines such as: Investing capital to
establish a Rubber Company in many other provinces and cities, investing capital to build
BOT road, invest in construction of latex mattress and pillow factory project, investing
capital to joint stock companies and projects of Vietnam Rubber Industry Group.
The Company has 5 Subsidiaries and associates (Dak Nong Rubber; Technical
Rubber; Kratie Rubber; North Industrial Zone; Wood Rubber) , and is itself a subsidiary of
Vietnam Rubber Group. Dong Phu Rubber Joint Stock Company is one of five rubber
companies currently listed on the Vietnam stock market. In 2006, the company changed to
the form of a joint stock company. DPR has been listed and traded on Hochiminh Stock
Exchange (HOSE) since 2007 with charter capital of 400 billion VND. The company's
ownership structure includes 60% state ownership, 23.1% foreign ownership and 16.9% other
ownership.

II, Industry and economic environments analysis

1, Economic characteristic:
Vietnam ranks fourth in the world in terms of natural rubber supply. In our country, of
the total area of 500,000 hectares planted with rubber trees, 63% of the area is in the age of
exploitation.

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 Industry productivity: In recent years, Vietnam's rubber industry has focused on
intensive farming, so it has significantly improved productivity per area of orchard, from 1.73
tons/ha in 1995, increased to 1 .96 tons/ha in 2006 and 2.07 tons in 2007, making Vietnam
ranked 2nd in the world in terms of productivity. The worker's tapping productivity, which
has a great influence on the productivity of latex extraction, depends on the worker's
experience and health. Abundant labor resources, low labor costs plus the application of
effective farming methods have created a competitive advantage of the rubber industry
compared to other industries. Rubber tree is a long-term industrial plant, has wide
adaptability, high tolerance to adverse conditions and is an environmental protection tree, so
many countries are interested in developing it on a large scale.
The exploitation period of rubber trees usually lasts about 20 years. The basic design
phase of rubber plots from the planting year on average lasts from 6-8 years. This stage
requires a lot of investment in materials, techniques, fertilizers as well as care. However, this
is the period when rubber trees give the least latex. The basic construction rubber lot with
70% or more of the trees that meet the standards of open scraping will be put into tapping.
Dynamic forces drive competition in the industry:

● Rubber industry includes a large number of firms selling similar products, so it is

price-taker and the competition is more fierce.

● Technological change plays an important role in maintaining a competitive advantage

of DPR.
The outstanding point of Dong Phu Rubber is the exploitation and processing.
Accordingly, the Company promotes intensive farming and applies scientific and technical
advances to improve orchard productivity. Besides, the company manages the technical
process of exploiting and optimizing the orchard, thereby saving costs, improving
productivity, and lowering product costs.
Porter’s five forces:

● Rivalry among existing firm

Domestically, our country has about 25 rubber companies with over 1000 ha of
orchards. Globally, facing stiff competition from major rubber producing countries such as
Thailand, Indonexia, Malaysia… Some countries with a long-standing rubber industry such
as Brazil, China... are restoring rubber planting areas as well as applying technical measures
to increase productivity. These are also significant competitors in the coming years.

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 ● Threat of new entrants

The barriers to entry in the rubber industry are high. As a result, the new company needs a
large land area and a lot of capital to focus on planting rubber trees in the first years and not
yet bring profit.

● Threat of substitutes

Synthetic rubber products are now also widely used and have a very high ability to
replace natural rubber products. But synthetic rubber is highly dependent on oil prices
because this is the main raw material for the production of synthetic rubber. In the current
period, the price of oil has increased sharply, so manufacturers are turning to natural rubber.

● Buyer power

Rubber consumption is mainly for the tire industry (60%), followed by technical
gloves (20%). The automobile manufacturing industry of China, India and other developing
countries is still growing strongly with a growth rate of over 10% per year. The output of
rubber produced in these two countries is not enough to meet the domestic demand. This is
the basis to ensure that the rubber demand of these countries is kept at a high level.

● Supplier power

Because planting and exploiting are the first steps in the value chain, so DPR is not
dependent on the supplier.

III, Company’s strategy analysis

● Nature of products and services

Its products are narrowly focused on rubber and service concentrate on renting
industrial and residential areas. DPR offers non differentiated products but not being price
competitive. Because the global demand exceeds the supply, the profit remains high.

● Integration in value chain

The value chain for the rubber industry begins with the first years growing rubber tree, after
exploiting latex or wood, then processing into various products, finally distribution, export as
well as trading rubber products. Dong Phu Rubber Joint Stock Company mainly participates
in planting and exploiting latex phases of the value chain ( through export 86% for the

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oversea automobile company). In domestics, DPR adds to the processing phase into medical
products.

● Degree of Geographical diversification

DPR has a relatively high degree of geographic diversification. The Company's

rubber products are mainly for export. The Company's rubber products are consumed in
Europe (France, Belgium, Holland, UK, Spain, Slovakia...), Korea, China, USA... through
traditional customers e.g. SMTP (Michelin), Saficalcan (France), Tae Young (Korea) and
other domestic companies.

● Degree of Industry diversification

The company has the following core business:

- Planting, caring for rubber trees, exploiting, processing, importing and exporting rubber
latex.
- Processing rubber wood and rubber-related products.
- Investing and developing industrial and civil works.
- Other businesses under the business registration certificate.
It is diversified across industries. Besides concentrating on rubber products, DPR also
expanded other businesses such as real estates, renting civil areas, industry areas,..

*Changes in data of Diluted Earnings per share and Basic Earning per share
According to the Consolidated Financial Statements of 2020, the Diluted Earning per share
and the basic earning per share was both 4335 VND. However, in the 2021 consolidated
financial statements, the company has adjusted the 2 accounts for 2020 into 2928 VND and
partially. The reason for changes in these two accounts can come from the new issue shares
of the company.

PART 2: FINANCIAL ANALYSIS

I, Liquidity analysis

Aiming to evaluate a company’s financial statements, liquidity is a crucial element.

Liquidity is the ability to convert cash into acquire cash, the aim of this cash is used for
paying short term Liabilities. In order to evaluate the liquidity of businesses, investors will
consider calculating the Liquidity ratios . In this report, we have analyzed the Liquidity of
Dong Phu rubber company and the data would be provided in the Excel file.

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 Table 1: Liquidity analysis

1, Quick ratio and Current ratio.

Firstly, about the definition. Quick ratio is the ratio measuring the ability to meet its short-
term liabilities with quick Assets. The aim of Current ratio is quite similar to the Quick ratio.
However, the Current ratio uses the Assets available on the Balance sheet.

It can be seen in the data, most of the ratios calculated fluctuate in 2020. However, in the
overview in 3 years, the Current ratio and Quick ratio tends to rise. The increase in Current
ratio from 0.909 to 1.2213 and Quick ratio from 0.82 to 1.04 that the firm is having the
ability to cover its short term debt, it also has the ability to react to sudden problems
and to fulfill its obligations. Furthermore, it can be seen that in 2019 and 2020, the Quick
ratio and Current ratio are all lower than 1. Until 2021, both ratios have increased to 1.21 and
1.04 partially. According to the formula, the Quick ratio is lower than 1 states that , we can
conclude that in the first two years, the Liabilities is higher than the Asset. Proven that in
2018 and 2019, the company í unable to meet its current obligation. And vice versa, when the
ratio increases in 2020, DPR will be able to meet its current liabilities.

2, Operating Cash Flow to Current Liabilities.

Operating Cash Flow to Current Liabilities is a company's ability to pay off its current
commitments with the cash flow generated by its core business activities is gauged by the
operating cash flow ratio, often known as a liquidity ratio.

With the operating Cash Flow to Current Liabilities, we take the 40% point as a
benchmark. If the Cash Flow to Current Liabilities is higher than 40%, this shows that the
company is in good health. Vice versa, if it is smaller than 40%, it is an alarming signal for

5
the firm in funding the working capital needs. In the calculated data, the numbers show that
in 2019 and 2020, DPR is not doing so well when the ratios are both lower than 40%.
Especially in 2020, the ratio is only 5.21%. The main reason for this is because. However, in
2021, the company had made a significant change when the ratio increased to more than
50%. Reflecting the recovery after COVID 19 pandemic.

3, Inventory Turnover, Days of Inventory on hand, Receivable turnover,

Payables turnover, Number of day payable, working capital turnover and Working
capital

In reflecting the efficiency, the Activities of the firms, we have the following ratios:
Inventory Turnover, Days of Inventory on hand, Receivable turnover, Payables turnover,
Number of day payable, working capital turnover and Working capital.

Firstly, is the Inventory turnover, the data in 2019 and 2020 are the same which is
5.6x, until 2021 it decreased down to 4.2x, which means it is decreasing. A decrease in
Inventory turnoverIt indicates that the firm is keeping its inventory for a longer amount of
time than it was previously seen.

Secondly, the Receivables turnover is also in a decreasing trend from 14.9x to 12.1x
throughout 3 years. From the Inventory turnover and the Receivables turnover ratio, it can be
seen that the company is decreasing in turnovers, meaning the goods of DPR are not really in
a high demand so the firm should slow moving the absolute inventory and tie up the
inventory.

Thirdly is the Days of sales outstanding ratio, measuring how long it typically takes a
business to collect money after a sale has been made. The formula is calculated by taking 365
divided by The Receivables turnover. As it has been mentioned above, the Receivable
turnover is having a decreasing trend, which makes the DSO ratio become higher. This has
reflected that the firm collects the money slower throughout the years from the customer, and
it may account for bad debt situations. However, the difference in DSO ratio throughout each
year is not significant.

In contrast with the DSO is the DPO, also known as the Number of payables
outstanding. The decreasing trend in this ratio shows that DPR is taking less and less time to
pay the financiers, debt holders, and suppliers. Taking shorter time to pay the partners would
help to improve the relationship between DPR with them.

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 The Purchases of DPR company .Depsit the COVID 19 pandemic, 2020 was still
the year that the company had the highest purchasing goods. The net working capital
reflects the days for the company to convert the working capital into revenue.

In conclusion the company should tighten the credit policies in order to improve the
turnover ratios, shortening DSO ratio, reducing the bad debt level and increase in cash flow.A
company is less efficient the higher the number for working capital days. It can be seen that
the company is becoming less efficient as the working capital days kept increasing
throughout the year.

II. Profitability analysis

1, Return on assets (ROA)

Table 2
ROA is a profitability ratio that measures a firm’s success in using or managing assets
to generate earnings independent of the financing of those assets. It can be clearly seen that
DPR’s ROA experienced an upward trend, it increased sharply from 5.88% to 7.05% in 2020,
and then increased nearly double in 2021. This uptrend in ROA comes from the dramatic
growth of profit margin for ROA and a slight growth of Asset Turnover.
Regarding Profit Margin, it witnessed a dramatic increase from 21.06% to 42.66%,
the profit margin in 2021 is more than twice from 2020. The reason is the rocket of net profit
after tax in 2021 that increased by more than 120% compared to 2020. Notably, the key
factors contributing to the company's strong net profit growth in 2021 is that DPR received
compensation for the first 260 hectares of land from the People's Committee of Binh Phuoc
province (planned to be 317 hectares) with the compensation price of 1 billion VND/ha. This
is the reason why DPR's revenue is 20% higher than the same period in 2020 but profit after
tax has increased by 132%. In addition, contributing factors to DPR's net profit are the
decrease in COGS in 2021 by 3.8% compared to 2020 and interest expense which has
decreased significantly since 2020 by 65%.

Turning to Asset Turnover, we can see that Asset Turnover went on a steady upward
trend over the period (from 0.28 to 0.32). DPR's asset turnover increased steadily because of

7
the increase in both revenue and total assets from 2019 to 2021. An important factor
contributing to the stable growth of asset turnover is the sharp increase of gross profit from
2019 to 2021 (15-34%).
2, ROCE

Table 3
ROCE measures the profitability of a corporation in relation to stockholders’
equity.According to the table, the DPR’s ROCE experienced an upward trend, it increased
steadily in the period 2019-2020 from 42.36% to 42.73%. And then the ROCE increased
significantly to 52.43% in 2021 by more than 9% compared to the remaining 2 years. One of
the reasons for the strong increase was the combination of profit margin for ROCE and
capital structure leverage.
For the profit margin for ROCE, the ratio decreased slightly from 17.70% to 15.65% in 2019-
2020. After that, the profit margin rocketed to 35.43% in 2021, the reason for this dramatic
increase came from the net profit after tax for shareholders of the parent company, the profit
of 2021 increased by more than 100% compared to the remaining years. This is the key factor
that led to the strong growth of profit margin for ROCE in 2021. Besides, the company's net
revenue in 3 years from 2019-2021 recorded a steady increase of 5-7%/year. Turning to the
capital structure leverage, we can see that it experienced a stable trend from 1.50 to 1.60.
According to the financial statement, the common shareholder’s equity didn’t have any
change in 3 years and the company's total assets increase year by year. The financial ratios
generally demonstrate a sound financial condition for the business, demonstrating solvency,
capital preservation and growth, and demonstrating efficient business operations.

III. Solvency analysis

Long-term solvency risk is essential for examining the firm’s ability to make interest
and principal payments on long–term debt and similar obligations. In fact, an insolvent
company is unable to pay its debts and will be forced into bankruptcy. In this report, we
examine long-term solvency risk by three measures: Debt ratios, Interest coverage ratio and

8
Operating cash flow to total liabilities ratio. These measurements below are applied for Dong
Phu Company as an example:

2019 2020 2021

Debt ratios

Liabilities to Assets Ratio 0.39 0.40 0.32

Liabilities to Shareholder's Equity Ratio 0.64 0.62 0.47

Long-term debt to Long-term capital 0.28 0.28 0.23

ratio

Long-term debt to Shareholder's Equity 0.38 0.38 0.30

Ratio

Interest coverage ratio 13.419 18.816 115.795

Operating CF to Total Liabilities Ratio 0.254 0.060 0.548

Table 4 : Solvency ratios of DPR from 2019 to 2021

Debt ratio is a solvency ratio that measures the relative amount of liabilities, particular
long-term debt, in a firm’s capital structure. This provides creditors and investors with a
general idea as to the amount of leverage being used by a company. The higher a debt ratio,
the greater is long-term solvency risk. It can be seen clearly that the debt ratios involving
total liabilities of DPR exhibited a slight decrease from 2019 to the end of 2021. Liabilities to
assets ratio and liabilities to shareholder's equity ratio was small and always lower than 0.5
implying that DPR had a stable business with potential of longevity because of decreasing
overall debt level. Meanwhile, there was a considerable reduction in the amount of debt
compared to equity. DPR used about one-fourth of its capital to finance operations (28%),
which seemed to be quite safe. However, there was an insignificant drop by 5% in 2021

9
(from 28% to 23%), this result can be explained by a dramatic decline in debt which went
along with an increase in capital compared to 2019. Overall, DPR seems to be in a good
position when it can minimize the riskiness of debt and it is expected that the ratio will
continue to decrease slightly or remain in the following year.

Looking at Table 4, in 2020, the company got OCF to total liabilities ratios
approximated 0 . Nevertheless, in the year OCF turned to increase significantly, thus, this
ratio was positive at above 50% of benchmark for a financially healthy firm. Regarding the
coverage interest ratio, DPR had a high ratio compared to the industry average, which is with
1 unit of net income, DPR can guarantee payment equal to 13-18 units of interest expense.
And after a tumultuous year, the ratio has increased 7-8 times higher in the previous years. . It
can be considered that the company has no liquidity risk, solvency ratio of DPR are high and
significantly improved compared to previous years thanks to strong financial potential.

PART 3: PROSPECTIVE ANALYSIS

I, Forecast the firm’s Financial Statements

1, Forecasting Sales
When forecasting financial statements, the majority of analysts often start by
estimating revenues from the company's main business operations. The majority of
businesses rely on the selling of products and the delivery of services to generate their
primary source of income. As is evident, DPR Company's sales of goods and provision of
services have resulted in a stable increase in recent years, from 1,033,254,234,073 VND in
2019, 1,138,040,948,029 VND in 2020 to 1,217,826,616,841 VND in 2021. On the other
hand, between 2019 and 2021, revenue deductions significantly rise by around 810,096,118
VND.
The company's current business operations indicate that sales revenue will slightly
increase or be stable in the future.

2019 2020 2021

Revenue from 1,033,254,234,073 1,138,040,948,029 1,217,826,616,841

sale goods and
services

Revenue 175,395,455 442,888,715 985,491,573

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 deduction

Table 5
Second, sales volumes (quantities) and prices are used to calculate revenues. The
price of rubber continued to rise in 2021, therefore even while the amount of rubber exports
only climbed by 11.7% over the previous year, the value of export turnover increased by
36.2%. Sales grew by 0.31% in 2019 and 10.14% in 2020, but fell by 3.13% in 2021. The
compound annual sales growth rate during the last three years was 5.63%.
DPR's primary sources of revenue growth are companies like:
● Rubber segment: sales volume declined by 7.7%, while average selling prices
increased by 18.8% (to VND 41.8 million/ton), resulting in a 15% increase to VND
860 billion (to 21,071 tons). The rubber segment's gross profit increased to VND 131
billion from VND 112 billion in 2020, yielding a gross profit margin of 15.3% (up
from 14.9% in 2020).
● Rubber tree liquidation: Because the overall area of the liquidation reduced somewhat
by 3% to 500 ha and the physical cost decreased by 21% to VND 220 million/ha,
revenue from the liquidation of rubber trees decreased by 22.3% to VND 122 billion.
In 2021, the sale of rubber trees generated a profit of 110 billion dong, a 20.2%
decrease.
● Real estate conversion of a rubber plantation into an industrial park cost DPR 260
billion dong in 2021 for the transfer of 260 hectares of land to the Binh Phuoc
People's Committee at a cost of 1 billion dong per hectare.
We may create projections for DPR Company that are more precise by looking at
revenue growth at the divisional level.

2019 2020 2021

Net Revenue 1,033,078,838,618 1,137,598,059,314 1,216,841,125,268

Table 6
The statistics table above shows that net revenues increased steadily from year to year
and peaked in 2021 at VND 1,216,841,125,268 (up 7.01% from 2020). The driving force for
the growth of DPR comes from the expectation of compensation for 2000ha of rubber land in
the next 10 years. The company will earn about 200 billion every year. Additionally, starting
in 2023, the extended Dong Phu and Nam Dong Phu industrial parks will be licensed and
available for lease, which will aid the business in maintaining revenue and expanding

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earnings from the leasing of industrial zones. Bac Dong Phu's industrial zone will be fully
occupied by 2022. . Assume that sales will grow 9% each year from Year+1 through Year+3.

2019 2020 2021 Year + 1 Year + 2 Year + 3

Revenue from 1,033,254 1,138,040 1,217,826 1,327,431 1,446,899, 1,577,120,7

sale goods and ,234,073 ,948,029 ,616,841 ,012,357 803,469 85,781
services

0.31% 10.14% 7.01% 9% 9% 9%

Table 7

2, Forecast operating expenses:

To forecast operating expenses, we combine the net revenue base with the common-
size method. Cost of products sold and selling, general, and administrative (SG&A) expenses
are the two operating expenses that are anticipated to vary in proportion to the predicted
sales.
a, Projection for Cost of Goods Sold:
From 73.81% of sales in 2019 and 71.85% in 2020 to 64.58% in 2021, the proportion
of costs of goods sold in relation to sales declined significantly. Additionally, even though the
revenue grows consistently each year, the cost of products sold tends to go down with time.
This demonstrates how skillfully DPR is controlling its selling expenses.
Dong Phu Rubber Joint Stock Company's financial results for the fourth quarter of
2021 show sales down 3.5% to 488 billion dong; however, cost of goods declined
precipitously, resulting in a 57% increase in gross profit to 208 billion dong. Margin of gross
profit increased from 26.2% to 42.7%. Given its recent performance, we thought that DPR
would be able to enhance it in the future by reducing costs and lowering the COGS
percentage. However, the global shortage of petroleum raises the price of industrial raw
materials. Additionally, this has an impact on business in general and rubber in particular. We
anticipate that, as a result of our study, DPR's COGS will gradually rise from 64.58% of
revenue in 2021 to 70% in year +1 and then significantly decline to 65% in years +2 and +3
thereafter. These are the COGS predictions:

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 2019 2020 2021 Year + 1 Year + 2 Year + 3

Cost of goods sold 762,643,9 817,653,0 786,532,0 889,378,7 911,546,8 993,586,09

27,813 58,668 15,939 78,279 76,185 5,042

COGS percentage 73.81% 71.85% 64.58% 67% 63% 63%

over revenue

Table 8
b, Projection for Selling, General and Administrative expenses:
The common-size income statement data reveal that the ratio of administrative
expenses to sales has marginally declined from 1.88% in 2019 to 1.7% in 2020 before
increasing to 2.7% in 2021. The proportion of administrative costs to sales has increased
slightly from 7.89% in 2019 to 8.04% in 2020, and then falls to 7.03% in 2021. Other
expenses have a tendency to rise over time; they made up 20.83% of sales in 2019, 22.71% in
2020, and around 28.93% in 2021. About 30.6% of the SG&A cost of DPR is incurred in
2019, 32.45% in 2020, and 38.66% in 2021. As a result, it is clear that SG&A expenses tend
to rise over time. DPR has had trouble controlling costs over the years, and it's probable that
this trend will continue in the years to come. Assume that from Year +1 to Year +3, selling
and general administration costs represent 41.4% of revenues. In which case, DPR is
speeding up the sale of old rubber trees and the conversion of land into industrial parks, thus
selling expenses, assuming they represent 2.4% of revenue, may marginally decline in the
ensuing years. Assuming management costs are 8% of income, administration costs will
generally rise as land conversion and rubber tree liquidation rise. If other expenses are 31%,
they will inevitably rise over time along with other corporate activity.

2019 2020 2021 Year + 1 Year + 2 Year + 3

Selling 19,411,163, 19,322,999,8 32,850,33 31,858,34 34,725,59 37,850,89

expenses 034 25 8,103 4,297 5,283 8,859

Operating 87,237,744, 81,561,485,3 91,544,56 106,194,4 115,751,9 126,169,6

expenses 199 57 9,309 80,989 84,278 62,862

Other 215,213,958 258,396,770, 352,350,9 411,503,6 448,538,9 488,907,4

expenses ,530 529 33,327 13,831 39,075 43,592

Table 9

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 c, Projection for other items
The price of rubber is currently still rising and is anchored at a high level on the
global market. According to the Association of Natural Rubber Producing Countries
(ANRPC), worldwide rubber production will amount to roughly 14.5 million tons in 2022,
while consumption will be between 14.3 million and 14.8 million tons. 2.5% more rubber is
expected to be consumed, although production may fall short of demand in 2022. The
Vietnam Rubber Association asserts that the price of latex would continue to rise or remain at
a high level as a result of the shortage of rubber raw materials. DPR predicts that the
corporation will face challenges in 2022 as the global economy changes. The Russia-Ukraine
conflict has had a particularly negative influence on the price of oil globally, which has led to
sharp increases in the cost of raw materials and transportation. Inflation has surged globally
as a result of the effects of the COVID-19 epidemic and rising prices. Countries are forced to
adopt strict monetary policies and boost interest rates in order to combat rising inflation.
Finance costs are anticipated to rise to 2.5% in the upcoming year, while financial income is
anticipated to rise to 7%.
2, Forecasting balance sheet
a, Asset
● Cash and cash equivalent
DPR, like all businesses, requires some cash on hand for day-to-day liquidity. The
balance sheet shows that between 2019 and 2021, CAV's cash holdings varied just slightly. In
2019, DPR's average cash balances were almost 24.5 days' worth of sales, however in 2020
and 2021, it was over 37.1 days' worth of sales and 30.1 days' worth of sales, respectively.
(Calculated by dividing the revenue-to-average cash balance by 365 days).
The quick ratio, which is determined by dividing the value of the assets with the
highest liquidity—cash, short-term investments, and receivables—by the sum of all short-
term liabilities, fell slightly between 2019 and 2020, from 0.81 to 0.7. When the quick ratio
falls below 1, it indicates that DPR lacks the quick assets necessary to cover all of its
immediate obligations. If there is a disruption, it might struggle to locate the money to pay its
creditors. However, the quick ratio of DPR increased to 1.04 in 2020, indicating that the
business has sufficient liquid assets to cover its immediate obligations. By the end of 2021,
DPR's cash and cash equivalent actually increased by 51.66%. The government tightened
monetary policies due to the year's high inflation, which increased the cost of goods and
services and caused businesses to hold onto less cash to prevent devaluation.

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 Year + 1 Year + 2 Year + 3

Cash and cash 385,520,316,075 424,072,347,683 466,479,582,451

equivalent

-35% 10% 10%

Table 10

● Short-term financial investments

The value of short-term investments varies from year to year. The ratio of short-term
investments to total assets is 21.12% in 2019; it will drop to 13.15 percent in 2020. However,
this rate rises to 17.31% in 2021. Current assets are anticipated to increase significantly in
Year + 1 about 53% over the previous year due to rising inflation, business deposits in banks,
and business purchases of financial products from banks. Since the government would
restrain interest rate hikes this year, the maturity of the bank's financial products will shorten,
which will lower the projected return and encourage businesses to spend cash for operational
expenses starting in year + 2 more sales or take out a USD loan.

Year + 1 Year + 2 Year + 3

S-T financial 1,109,565,711,324 765,600,340,813 1,025,904,456,690

investment

53% -31% 34%

Table 11

● Account receivable

One of the items with a significant growth is accounts receivable, which is anticipated
to continue rising and provide a positive message to the business. According to an analysis of
DPR's accounts receivable turnover ratios, collection times have increased over the last three
years, going from an average of 24.4 days in 2019 to 37.1 days in 2020 and 30.1 days in
2021, while accounts receivable turnover has trended downward from 14.9 in 2019 to 12.1 in
2021. Since the amount of short-term receivables from clients tends to decline to VND

15
54,339,292,629 from 2019 to 2021, the decline in receivable days demonstrates that DPR
manages its debts poorly and that the product is sold more slowly. Receivables from rubber
plantation projects under the hunger eradication and reduction program Poverty of Binh
Phuoc Provincial People's Committee.

Year + 1 Year + 2 Year + 3

S - T Receivable 86,942,868,206 139,108,589,130 215,618,313,152

60% 60% 55%

L - T Receivable 6,244,864,536 9,367,296,805 14,050,945,207

-86% 50% 50%

Table 12

● Inventory

Spending by DPR on rubber mining equipment and rubber goods climbed

significantly from 121 billion to 180 billion, or nearly 30%. But manufacturing a lot of stuff
and not selling it. As a result, year + 2 will see a decrease in the number of tools that need to
be purchased as the inventory is likely to grow, but not significantly.

Year + 1 Year + 2 Year + 3

Inventory 265,162,572,062 328,801,589,357 407,713,970,803

24% 24% 24%

Table 13

● Fixed asset

Because the corporation purchases new machinery and equipment each year to
cultivate rubber trees, fixed assets increase steadily. The company also relocated to industrial
park real estate, which reduces the requirement for machinery and equipment, thus fixed
assets will expand at a reasonably moderate and consistent rate of between 1.01% and 1.02%
from year +1 to year +3.

16
 ● Investment real estate

Real estate investment declines 3% in year + 1 due to rising interest rates and
adversely affected by the increase in the price of construction materials leading to the decline
of real estate. Since China is closing, the cost of construction materials is gradually rising,
and China can reopen in year +2, it will be possible for the company to invest more in real
estate when the market stabilizes so it will increase to 2% in year +2 and 5% in year +3.
China is also anticipated to introduce real estate support programs.

● Long-term assets in progress

Long-term assets in progress increased 15% as the company spent money to purchase
more fixed assets and construct more buildings. The corporation spends a lot of money on
purchasing fixed assets, and the subsidiaries are required to build. In addition, the cost of
construction that is now underway is rising over time due to rising prices for raw materials
and oil. Additionally, the business is investing money in construction projects to transform
property used for rubber production into industrial park real estate.

● Long-term financial investment

Long term, financial investment increased sharply 43% in year +1 as held-to-maturity

investments increased due to corporate purchases of more bonds. Long-term financial
investment decreases 20% in year +3 because after maturity, businesses will use more
money in short-term financial investments because interest rates will start to decrease.

b, Liabilities

● Short-term trade accounts payable

Loans and long-term financial leasing obligations are loans having a repayment
duration of more than 12 months from the time of producing financial statements. The
accountants portray accounts that must be paid within the next 12 months of the time the
financial statements are made as loans and short-term financial lease liabilities in order to
establish a payment schedule.

Short-term trade 18,813,782,634 11,605,025,937 6,319,973,651 7,618,918,414

17
Years Accounts Payable

accounts payable
COGS Add: Less: Equal: Purchases Payables Accounts
Beginning Inventory per day Period Payable
Ending Inventory
Inventory Purchases

2022 889,378, 265,162, 213,840, 940,700,56 2,577,261, 25 64,431,

6,420 826
778,279 572,062 783,921 545,650

2023 911,546, 328,801, 265,162, 975,185,89 2,671,742, 25 66,793,

3,480 174
876,185 589,357 572,062 554,350

2024 993,586, 407,713,970,803 328,801, 1,072,498,4 2,938,351, 25 73,458,

76,488 990
095,042 589,357 799,750

Table 14

The Accounts Payable Turnover of DPR tends to increase in the last 3 years, at 64.2
in 2019 and reaching 110.0 in 2021, with payments period averaging 103 times per year (an
average turnover of roughly 25 days) during the last 3 years. We start by projecting inventory
purchases on account in order to predict the future account payable balance. We use our
previous projections of DPR's cost of goods sold and apply the adjustments to the inventory
balances to determine the amount of inventory purchases that will be processed through
account payable. We then make the following prediction for the account payable base's final
amount based on a 25-day payable period:

(Purchases per day = Inventory Purchases/365)

(Accounts Payable = Purchases per day * Payables Period)

Table 15

● Short-term advances from customers

18
 DPR company has received 4,806,171,953 VND, 30,620,135,180 VND, and
6,396,980,165 VND, which was recognized in an account of short-term advances from
customers in 2017, 2018, and 2019 respectively. We think that this account accurately
reflected the clients' happiness and trust in DPR's goods and services, which may be shown in
the company's historical net income figures. Based on the increase and decrease of the Short-
term advances from customers ratio in the last 4 years, it’s difficult to predict the figure for
the next 3 years. Therefore, it will remain at 0.37% of total assets in the following years.

Year Short-term advance from customers

Total Assets Percentage of Total Ending Balance

Assets

2022 4,248,953,236,326 0.37% 15,721,126,974

2023 4,063,897,905,023 0.37% 15,036,422,249

2024 4,431,816,927,828 0.37% 16,397,722,633

Table 16

● Taxes and other payables to state authorities

Taxes and other payables to state authorities of DPR decreased sharply in 2019 (down
52% from 22,004,884,164 in 2018 to 11,977,785,651 in 2019). But then it has increased
continuously in the last 2 years (61% in 2020 and 72% in 2021). We predict that this account
will remain constant at 0.57% of total assets in the next 3 years:

Year Taxes and other payables to state authorities

19
 Total Assets Percentage of Total Ending Balance
Assets

2022 4,248,953,236,326 0.57% 24,219,033,447

2023 4,063,897,905,023 0.57% 23,164,218,059

2024 4,431,816,927,828 0.57% 25,261,356,489

Table 17

● Payables to employees:

The amount that DPR paid its employees between 2019 and 2021 was 115,894,386,470,
131,870,572,291, and 137,886,373,804 VND, respectively. Our standard size balance sheet
statements show a tendency toward growing employee payables, from 3.10% of total assets
in 2019 to 3.42% in 2019. Through the next years, we anticipate that the payables to
employees will remain constant at 3.4% of total assets:

Year Payables to employees

Total Assets Percentage of Total Ending Balance

Assets

2022 4,248,953,236,326 3.34% 141,915,038,093

2023 4,063,897,905,023 3.34% 135,734,190,028

2024 4,431,816,927,828 3.34% 148,022,685,389

Table 18

20
 ● Other short-term payables:

DPR's other short-term payables show a sizable decline in the 2019–2021 period, according
to the balance sheet. We anticipate that other short-term payables will continue to fall by 5%
annually in the coming years due to their tendency to fall sharply from 279,973,649,154
VND in 2019 to 149,994,575,211 VND in 2021 (as shown in the common size balance sheet
statement, they also fell from 7.49% of total assets to 3.72%). Thus, we anticipate that the
other short-term payables prediction will be as follows:

Year Other short-term payables

Beginning Balance Growth rate Ending Balance

2022 149,994,575,211 -25% 112,495,931,408

2023 112,495,931,408 -25% 84,371,948,556

2024 84,371,948,556 -25% 63,278,961,417

Table 19

● Bonus and welfare fund

According to the common size balance sheet data, the amount of bonus and welfare funds
was shown to be significantly expanding from 1.20% of total assets in 2019 to 1.73% in
2021. This number shows that the company's management is very concerned about the
situation of employees, using the fund to reward individuals who have made efforts at work.
We believe that DPR's bonus and welfare fund will maintain at 1.5% of the company's total
assets in the next 3 years.

21
 Year Bonus and welfare fund

Total Assets Percentage of Total Ending Balance

Assets

2022 4,248,953,236,326 1.5% 63,734,298,545

2023 4,063,897,905,023 1.5% 60,958,468,575

2024 4,431,816,927,828 1.5% 66,477,253,917

Table 20

● Long-term expenses

Based on the balance sheet, long-term expenses tend to increase, at VND 11,369,170,582 in
2019 has increased to VND 26,705,818,457 in 2021. This account is forecast to continue to
increase in the future, at 36% in the first year and 35% in 2 next year

Year Long-term expenses

Beginning Balance Growth rate Ending Balance

2022 26,705,818,457 36% 36,319,913,102

2023 36,319,913,102 35% 49,031,882,687

2024 49,031,882,687 35% 66,193,041,628

Table 21

● Short-term & Long-term Unrealized Revenue

22
Based on the balance sheet, short-term unrealized revenue in 2019 was VND 16,249,346,687,
accounting for 0.43% of total assets, increased by 92% in 2020, reached VND
31,556,948,177 and then decreased slightly to VND 27,221,283,067, reaching 0.68% of total
assets in 2021. We predict that short-term unrealized revenue will remain at 0.65% of total
assets in the following years

Year Short-term unrealized revenue

Total Assets Percentage of Total Ending Balance

Assets

2022 4,248,953,236,326 0.65% 27,618,196,036

2023 4,063,897,905,023 0.65% 26,415,336,383

2024 4,431,816,927,828 0.65% 28,806,810,031

Table 22

Besides, it can be clearly seen that long-term revenue accounts for a much larger
proportion than short-term revenue. The figure of long-term revenue in 2019 is VND
608,156,553,188, accounting for 16.27% of total assets, reaching 19.02% of total assets in
2021. The above figures show that long-term revenue tends to increase through each year.
Therefore, we expect this figure to of grow 13% in the next year and 12% in the following
years.

Year Long-term unrealized revenue

Beginning Balance Growth Rate Ending Balance

2022 766,920,817,073 3% 789,928,441,585

23
 2023 866,620,523,292 3% 813,626,294,833

2024 970,614,986,088 3% 838,035,083,678

Table 23

● Short-term & Long-term loans and finance leases:

According to the annual report, short-term and long-term loans and finance leases have a
marked decrease. To explain this, in the past 2 years, DPR has liquidated many rubber trees
and received land compensation from the State, so the company has paid off a large part of its
debts to banks. Short-term loans and finance leases in 2019 was VND 105,937,204,335,
accounting for 2.83% of total assets, decreased to VND 28,984,522,200 in 2021, accounting
for 0.72% in 2021 and is forecasted to continue to decrease in the following years.

Year Short-term loans and finance leases

Beginning Balance Growth rate Ending Balance

2022 28,984,522,200 -39% 17,680,558,542

2023 17,680,558,542 -39% 10,785,140,711

2024 10,785,140,711 -39% 6,578,935,833

Table 24

DPR's long-term loans and finance leases also decreased markedly in the past 3 years:
VND 175,094,897,664 in 2019 (accounting for 4.69% of total assets) to VND
24,889,515,600 in 2021 (accounting for 0.62% of total assets). This account is predicted to
continue to decline over the next 3 years.

Year Long-term loans and finance leases

24
 Beginning Balance Growth rate Ending Balance

2022 24,889,515,600 -59% 10,204,701,396

2023 10,204,701,396 -59% 4,183,927,572

2024 4,183,927,572 -59% 1,715,410,305

Table 25

● Long-term Liabilities + Short-term Liabilities = Total Liabilities

The data of short-term liabilities and long-term liabilities is shown in the excel file after
summing the items.

c, Shareholders’ Equity

According to the annual report, in 2019, the capital reached VND 2,287,588,618,768 and
increased to VND 2,744,404,297,867 in 2021. This account is expected to grow by 4.4% in
the coming years.

Year Shareholders’ Equity

Beginning Balance Growth rate Ending Balance

2022 2,744,404,297,867 4% 2,854,180,469,782

2023 2,865,158,086,973 4% 2,968,347,688,573

2024 2,991,225,042,800 4% 3,087,081,596,116

25
 Table 26

II, Firm’s equity valuation

This report would inititate to value DPR firm based on 2 approaches which are
Earning based approach and Dividend approach. The 2 approaches share the same data of
forecasting Net income and forecasting Dividend payout, in which the number is provided in
this table below:

Table 27 : Forecasted Net income and Dividend payout

*The forecasted Net income in the table is also the Comprehensive income of the firm

*Calculating the Return on Equity:

Both methods are required to calculate the Rate of Return on Equity. In order to
calculate the Return on Equity, the data of Beata, Risk free- rate and Risk market premium is
needed. In this report, according to the Betas by sector site, we have conducted the datas as
follows: Rf= 5.129% and (Rp – Rf), in Vietnam equals 11.04%. Furthermore, we have used
the 10 year government bond rate of Vietnam as the Risk rate, which equals 5.129%.

Using the CAPM model: Re = Rf + β * (Rm – Rf) => Re = 12.85%

Notes for each element:

▪ Re: required return on equity capital of DPR

▪ Rf: risk-free rate of return

▪ β: market beta of rubber and tires industry

▪ Rm – Rf: market risk premium

1, Earnings based approach.

Among the life of the firm, earnings is the Cash Flow of the firm. As a result, we can use the
firm’s earnings to evaluate the company.

26
 *Calculating the Required income

After having the Return on Equity, the data on forecasted Net income from year Y+1 to year
Y+3 would be used to calculate the Required net income and the Residual income. In
addition, this report used the Total Equity data of the firm in 2021 as the beginning value of
Equity of the firm, which is 2,742,552,593,177 VND. We can apply the formulas
( specifically stated in the Excel file ) and have an output of this following table:

Table 28

With the Earning based method. We would discount the future earnings back to present value
and conclude the final value of the firm. Applying the Equity valuation using the Residual
Income Model, we would have the following steps and formulas to calculate the Present
value of DPR:

*Evaluating the value of the company

· Calculate Present value of dividends from year Y + 1 to year Y +3 using the discount
rate

Formula 1

· Calculating Present value of dividends from of continuing value after year Y +3

requires the growth rate of the firm’s Net Income. In the Excel file, the estimated growth rate
from year Y+1 to year Y+3 is 9% annually, so the further estimated growth rate should be
lower than 9%. Furthermore, because the future is uncertain, we have conducted the analysis
and came to the conclusion that the annual growth rate is 5% after year Y+3 . To discount
the continuing value form after year Y + 3 back to present, we use this the formula:

27
 Formula 2

· The current value of the firm would be the result’s sum of the formula 1 and formula 2.
As a result, we can conclude that the current value of the firm equals 4,111,816,252,728
VND.

DPR’s number of shares in 2021 = 43,000,000

4,111,816,252,728
 Value per share= = 95,623 VND
43,000,000

2, Dividend Based approach

In 2019, the dividend payout ratio was high due to the rise in rubber prices at the time
and the rise in global rubber consumption, which made this business abundant, according to
the dividend payout ratio in recent years. All industries were severely impacted by the
COVID 19 outbreak by 2020, though, and as a result, the dividend payout ratio dramatically
declined. When the death toll rises and a global blockade is implemented in 2021, the
epidemic situation will worsen and DPR's dividend payment rate will decline as a result.
Beginning in 2022, there have been positive adjustments in the epidemic condition.
However, the conflict between Russia and Ukraine raised the price of oil globally, which had
the knock-on effect of driving up the cost of goods and services, in turn raising the cost of
raw materials. Assume that from year +1 to year +3, the dividend payout ratio will be 40%. It
is anticipated that the dividend ratio will rise to 57% after the inflation situation has
stabilized.
Using the following formula to calculate present value of all future cash flow of
DPR’s equity:

D1 D2 D3 D 3∗(1+ g)
Vo = + 2+ 3 +
(1+ ℜ) (1+ ℜ) (1+ ℜ) ( ℜ−g)∗(1+ℜ)3

28
 649,439,267,337 754,912,905,763 824,165,775,161
= + 2 + 3 +
(1+12.85 %) (1+12.85 %) (1+12.85 %)
824,165,775,161∗(1+5 %)
(12.85 %−5 %)∗(1+12.85 % )3
= 9,412,341,491,860

DPR’s number of shares in 2021 = 43,000,000

Vo 9,412,341,491,860
 Value per share = = = 218,891.66 VND
Number of shares 43,000,000

III, Conclusion and recommendation

DPR is now Vietnam's large-scale rubber manufacturing company. DPR's operating
position remained relatively consistent from 2018 to 2021, with an average net profit rise of
roughly 25.32%. From our financial analysis, we can draw several conclusions for our
decision regarding DPR. There is a rapid increase in the structure of COGS over total
revenue, interest expense tends to decrease in both value and proportion to revenue. This
shows the restriction of borrowing money for production and investment activities in the
period. The sharp decline in rubber prices is equivalent to paying high dividends to
shareholders. Based on the financial statement, we can clearly predict the cost-cutting trend
of the rubber industry because of selling expenses. The company's goods and administrative
expenses have changed markedly compared to the previous period.

In this situation, we recommend that investors with hope of earning regular dividend
and interest payment and stand for lower risk should buy DPR’s stocks for long-term holding.
The trend is shifting to a combination of rubber latex production and natural rubber-based
consumer products. This trend is good support for inventory reduction and for rubber price
increase. However, when manufacturing these products, the company needs to focus on
distribution and control production costs well to be competitive with products that are
currently popular in the market.

29
 REFERENCES

Dong Phu Rubber Joint Stock Company Financial Statement, 2018. Retrieved from:

https://static2.vietstock.vn/data/HOSE/2018/BCTC/VN/NAM/
DPR_Baocaotaichinh_2018_Kiemtoan_Hopnhat.pdf

Dong Phu Rubber Joint Stock Company Financial Statement, 2019. Retrieved from:

http://doruco.com.vn/data/upload_file/File/Nam%202020/BCTC%20HN%20DA%20KIEM
%20TOAN%20NAM%202019.pdf

Dong Phu Rubber Joint Stock Company Financial Statement, 2020. Retrieved from:

https://static2.vietstock.vn/data/HOSE/2020/BCTC/VN/NAM/
DPR_Baocaotaichinh_2020_Kiemtoan_Hopnhat.pdf?fbclid=IwAR1hFSJ-
iLirGndAiZVSpf8sXTop3M__HfWk2Xbq3WgJpHC0PhkBwnDPqe0

Dong Phu Rubber Joint Stock Company Financial Statement, 2021. Retrieved from:

http://doruco.com.vn/data/upload_file/File/2020-2021/20220324-DPR%20-%20BCTC
%20HOP%20NHAT%20KIEM%20TOAN%202021.pdf

betas: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html\

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http://www.worldgovernmentbonds.com/bond-historical-data/vietnam/10-years/#:~:text=The
%20Vietnam%2010%20Years%20Government,318.1%20bp%20during%20last%20year.

Operating Cash Flow Ratio (No date). Retrieved from:

https://corporatefinanceinstitute.com/resources/accounting/operating-cash-flow-ratio/

pinetree.vn, April 05, 2022, “Phân tích cổ phiếu DPR’’. Retrieved from:
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32