List of Members:

Group participants ID number Email Contribution

voductoan.rennes1@st.ueh.edu.vn
Võ Đức Toàn 23115070 100%
nguyenphucdanghuy.rennes1@st.ueh.edu.vn
Nguyễn Phúc Đăng Huy 23115048 100%
nguyenthaiduong.rennes1@st.ueh.edu.vn
Nguyễn Thái Dương 23115052 100%
phamnguyenductrong.rennes1@st.ueh.edu.vn
Phạm Nguyễn Đức Trọng 23116464 100%
1. Introduction
1.1 Overview
- Company name: Hoa Phat Group JSC
- Address: Pho Noi A Industrial Park, Gia Pham Ward, Yen My District, Hung Yen Province, Vietnam
- Business license: 0503000008
- Website: https://www.hoaphat.com.vn/en
- The company’s independent audit firm: KPMG (a global network of professional services firms that
provide audit, tax, and advisory services. KPMG's headquarters are located in Amstelveen, Netherlands.)
1.2/ Primary lines of business:
Hoa Phat is the leading industrial manufacturing group in Vietnam. Originating as a construction machine
and equipment trading company in August 1992, Hoa Phat gradually expanded its business to trading and
production of Furniture, Steel Pipe, Steel, Refrigeration, Real Estate and Agriculture. Since November 15,
2007, Hoa Phat has been officially listed on the Stock Exchange under the stock ticker symbol ‘HPG’
(HOSE:HPG)
1.3 Business area
Currently, the Group operates in 05 sectors: Iron and steel (construction steel, hot rolled coil) - Steel
products (including steel pipes, galvanized steel, drawn steel wire, prestressed steel) - Agriculture - Real
estate – Home appliances. Steel production is the core, accounting for 90% of the revenue and profit of the
Group. With a capacity of 8.5 million tons of crude steel per year, Hoa Phat is the largest steel producer in
Southeast Asia.
1.4. Shareholders and partners:
List of subsidiaries and associate companies of the Hoa Phat Group corporation (as of December 31st,
2022):
 Hoa Phat Dung Quat Steel Joint Stock Company, owns 100%
 Hoa Phat Hung Yen Steel Company Limited, owns 100%
 Hoa Phat Roofing Sheet Company Limited, owns 100%
 Hoa Phat Hai Duong Steel Joint Stock Company, owns 100%
List of the executive board at Hoa Phat Group JSC:
 Mr. Tran Dinh Long, Chairman of the Board of Directors, owns 1,516,320,000 shares
 Mr. Doan Gia Cuong, Vice Chairman of the Board of Directors/Director of Hoa Phat Furniture JSC,
owns 72,886,209 shares
 Mr. Nguyen Manh Tuan, Vice Chairman of the Board of Directors, owns 131,884,907 shares
 Mr. Tran Tuan Duong, Vice Chairman of the Board of Directors, owns 134,512,700 shares
 Mr. Hoang Quang Viet, Member of the Board of Directors, owns 26,289,184 shares
1.5. The company’s competitors:
Hoa Sen Group, also known as Hoa Sen Corporation (HOSE: HSG), is a leading Vietnamese producer
and distributor of steel and construction materials. Established on August 8, 2001, with an initial charter
capital of VND 30 billion, Hoa Sen Group has undergone remarkable growth and development to become
the top player in Vietnam's steel industry.
2. Business environment analysis
2.1 Industry analysis
2.1.1 Analysis of the competitive environment (Michael Porter’s 5) in the steel industry

 Threat of new entrants: The steel industry in Vietnam has relatively low barriers to entry because
of the attractive profit margins in the steel industry and the government support for steel industry
development but competition is intense with established players, making it difficult for new entrants
to gain market share.
  The bargaining power of suppliers: Suppliers in steel industry in Vietnam have low bargaining
power due to lack of raw material, low demand, weak purchasing power and competition from other
countries
 The bargaining power of buyers: Buyers in Vietnam have high bargaining power since Buyers can
easily compare prices and quality across different steel suppliers, allowing them choose the products
with lower price or high quality
 Threat of substitutes: The threat of substitutes in Vietnam is high since there are alternative
building materials such as concrete, plastic and wood
 Competitive rivalry: Competitive rivalry in steel industry is intense, with many players inside the
country competing, and also in other countries (e.g: China)

2.1.2 Analyze the influence of other business environment factors

The macroeconomic situation and the steel market in particular are still showing no signs of improvement.
The market is declining faster than previously forecast and is fraught with risks due to the cumulative impact
of several unfavorable global factors:

 Escalating conflicts disrupting global supply chains;

 US inflation rate still high, monetary policy quite tough
 The continued downturn in the domestic and Chinese real estate sectors has caused the Q1/2024
market to fail to recover as expected
 Market demand remains low, and purchasing power is weak.

The Vietnamese steel market is heavily influenced by the Chinese steel market. In the context of the
"freezing" of the Chinese real estate sector, steel inventories in China are high, so Chinese steelmakers are
stepping up exports. Vietnam is the largest steel export market for China in Southeast Asia. According to
data from the General Department of Vietnam customs, the country imported more than 2.8 million tons of
various types of iron and steel from China in Q1/2024, up 94.1% over the same period in 2023.

The situation of hot-rolled steel imported from China and India into Vietnam is so tense that Hoa Phat
Group and Formosa Company have submitted petitions to the Ministry of Industry and Trade to propose the
application of anti-dumping measures against this product. Some steel mills continue to adjust down the
price of construction steel coils, with a common decrease of VND 100,000/ton.

Fierce market competition has caused prices of flat steel products in the country to continuously decline
compared to the same period last year. Galvanized sheet producers also adjusted prices down by VND
300,000 - 600,000/ton in March 2024 depending on the type, region, and at the same time continued to apply
discount and recovery policies. The price reduction will affect market sentiment and demand for steel,
making it difficult for businesses (HPG, HSG, NKG...) to improve profits and sales

2.1.3 Steel industry outlook in the long term

According to the Vietnam Steel Association, domestic construction steel prices are projected to recover to
15 million dong per ton in 2024, driven by rising global steel prices and increasing demand in the
Vietnamese market. The steel production outlook for Vietnam is forecast to grow by about 10% in 2024 and
8% in 2025, as steel demand in domestic economic sectors recovers. Steel production is expected to reach
28-30 million tons in the 2024-2025 period, and domestic steel consumption is forecast to reach 21-22.5
million tons.

In addition, at the end of the first quarter, NKG, HPG, and HSG companies have all announced financial
reports with higher profits than the same period last year, and major projects of these companies are being
actively implemented or are nearing completion. 2024 may not be a breakthrough year for the steel industry
as the economy still faces many uncertainties such as exchange rate fluctuations, interest rates, and the
global economy, but the positive changes from the companies, the Draft Outline of the Strategy for
Development of the Steel Industry in Vietnam by 2030, Vision to 2045 (green growth), the steel industry is
expected to recover, grow strongly and continue to play an important role in the Vietnamese economy.
2.2 SWOT analysis

Strengths:

 Market leader: HPG is the largest steel producer in Vietnam, with a strong brand reputation and a
dominant market share.expand_more
 Diversified product portfolio: HPG produces a wide range of steel products, including construction
steel, flat steel, and pipes, which helps to mitigate risk and capture opportunities in different market
segments.
 Vertically integrated: HPG controls its entire supply chain, from iron ore mining to steel
production, which gives them greater control over costs and quality.
 Cost efficiency: HPG has invested heavily in modern technology and efficient production processes,
allowing them to maintain competitive prices.
 Expanding footprint: HPG is actively expanding its production capacity and exploring new
markets, both domestically and internationally.expand_more

Weaknesses:

 Reliance on the domestic market: A large portion of HPG's revenue comes from the Vietnamese
market, making them vulnerable to fluctuations in the domestic economy.
 High debt levels: HPG has a significant amount of debt, which could limit their ability to invest in
growth and innovation.expand_more
 Exposure to commodity price fluctuations: The price of steel is heavily influenced by the cost of
raw materials like iron ore and coking coal, which can be volatile.
 Limited product differentiation: While HPG offers a diverse product portfolio, there may be room
for further differentiation to stand out from competitors.exclamation
 Environmental concerns: Steel production is a major contributor to greenhouse gas
emissions.expand_more HPG may face pressure to become more environmentally sustainable.

Opportunities:

 Government infrastructure spending: Increased government investment in infrastructure projects

could drive up demand for steel.
 Growing urbanization: As Vietnam's cities continue to develop, the demand for construction steel
is expected to rise.
 Expanding export markets: HPG can leverage its production capacity and competitive pricing to
capture opportunities in new export markets.exclamation
 Technological advancements: Advancements in steel production technology can further improve
HPG's efficiency and product quality.
 Green steel initiatives: HPG can invest in greener production technologies and explore
opportunities in the growing market for sustainable steel.exclamation

Threats:

 Intensifying competition: The Vietnamese steel market is becoming increasingly competitive, with
rising imports from China and India.
 Trade protectionism: Global trade tensions and protectionist policies could disrupt HPG's export
activities.exclamation
 Economic slowdown: A global economic slowdown could dampen demand for steel and impact
HPG's profitability.
  Rising labor costs: As Vietnam's economy develops, labor costs are expected to rise, which could
put pressure on HPG's margins.
 Stricter environmental regulations: More stringent environmental regulations could increase
compliance costs for HPG.

3. Analyze financial statements

3.1.1 Analysis of volatility trends and structure of assets and capital for the period

Total assets:
Growth: Hoa Phat's total assets grow steadily over the years, from VND 131,511 billion in 2020 to VND
187,782 billion in 2023, with an average growth rate of 33.8% per year.
Structure: The proportion of non-current assets is much higher than current assets, reflecting the long-term
nature of the Group's investments in factories, equipment and real estate.
Total capital:
Growth: Similar to total assets, Hoa Phat's total capital also grows steadily over the years, from VND
131,511 billion in 2020 to VND 187,782 billion in 2023, with an average growth rate of 33.8% per year .
Structure: Debt accounts for a significant proportion of total capital, showing that the Group is using
financial leverage to promote growth. However, the debt/equity ratio is at a safe level, showing that the
Group has good debt repayment ability.
Current assets:
Growth: Hoa Phat's current assets grow steadily over the years, from VND 56,748 billion in 2020 to VND
82,717 billion in 2023, with an average growth rate of 35.3% per year.
Structure: Inventory accounts for the largest proportion of current assets, showing that the Group is investing
heavily in raw materials and finished goods.
Non-current assets:
Growth: Hoa Phat's fixed assets grow steadily over the years, from VND 74,765 billion in 2020 to VND
105,067 billion in 2023, with an average growth rate of 33.5% per year.
Structure: Factories and equipment account for the largest proportion of fixed assets, showing that the Group
is investing heavily in expanding production.
Equity:
Growth: Hoa Phat's equity grows steadily over the years, from VND 59,072 billion in 2020 to VND 102,836
billion in 2023, with an average growth rate of 42.2% per year.
Structure: Retained profits account for the largest proportion of equity, showing that the Group is reinvesting
profits for development.
 T
he chart shows the asset growth rate of Hoa Phat Group in the period from 2020 to 2023. The chart includes
three curves showing the growth rate of total assets, current assets and permanent assets.
1. General trend:
Asset growth rate tends to increase: In general, Hoa Phat Group's asset growth rate tends to increase during
this period. The average growth rate of total assets reaches 13.8% per year.
Higher growth rate of current assets: Growth rate of current assets is higher than growth rate of fixed assets
during this period. This shows that the Group is focusing on investing in short-term assets to serve business
activities.
Comment:
The chart shows that Hoa Phat Group's asset growth rate is quite high and stable in the period from 2020 to
2023. This shows that the Group is developing strongly and effectively.
The growth rate of current assets is higher than the growth rate of fixed assets, showing that the Group is
focusing on investing in short-term assets to serve business activities.
However, it should be noted that asset growth rate can be affected by many factors such as market
fluctuations, the Group's business strategy,...
The growth rate of equity seems to be fluctuating throughout the period. It experiences a significant increase
in 2021, followed by a decrease in 2022, and then another increase in 2023. The growth rate of Total
Liabilities also appears to fluctuate, but generally shows a downward trend from 2020 to 2023. This suggests
that HPG might be managing to slow down the growth of its liabilities. The fluctuations in equity growth
rate could be due to factors like issuing new shares or retaining earnings. The overall positive growth
indicates a healthy increase in shareholder equity. The potential downward trend in total liabilities suggests
that HPG might be effectively managing its debts, possibly by paying down existing debt or avoiding new
high-interest debt. Over the entire period (2020-2023), the growth rate of total stockholders' equity has
consistently remained higher than the growth rate of total liabilities. This indicates that HPG's equity is
growing at a faster pace than its liabilities, which is a positive sign for the company's financial health.

High proportion of fixed assets: In the period from 2020 to 2023, the proportion of fixed assets of Hoa Phat
Group is always higher than current assets. This shows that the Group is investing heavily in factories,
equipment and other long-term assets to serve production and business activities.
Fluctuating proportion of current assets: The proportion of current assets of the Group had certain
fluctuations during this period. This may be due to the influence of a number of factors such as steel price
fluctuations in the international market, the Group's business strategy,... The asset structure of Hoa Phat
Group shows that the Group is focusing on investing in long-term assets to serve production and business
activities. However, the Group needs to closely monitor market fluctuations and adjust business strategies
accordingly to ensure safety and efficiency in financial operations.
A lower proportion of non-current assets compared to current assets could suggest HSG invests less heavily
in long-term assets like factories and equipment compared to HPG. This might be due to factors like renting
production facilities instead of owning them; leasing equipment instead of purchasing it, focusing on a more
flexible production model. The current assets witnessed a sharp increase from 51% (2020) to 65% in 2023,
which indicates that HSG might be prioritizing readily available resources like inventory and receivables,
potentially indicating a focus on short-term production and sales cycles.

The proportion of current liabilities fluctuates through the period, decreased mildly from 40% in 2020 to
37% in 2023. The proportion of non current liabilities witnessed the same trend, went down from 16% in
2020 to 7% in 2023 and the equity proportion increased sharply in the same period. The decline in both
short-term and long-term debt, coupled with a sharp increase in equity, suggests that HPG has been paying
down debt and raising capital to support its expansion plans. This could improve its financial attractiveness
to creditors and investors.

HSG's financial statements show fluctuations in the proportions of current and non-current liabilities, with a
decrease from 2020 to 2023. Short-term liabilities went from 51% in 2020 to 38% in 2023, while long term
liabilities went from 12% to 0%. Conversely, the proportion of equity has grown significantly in the same
period, from 37% in 2020 to 62% in 2023. This trend could be linked to debt repayment and capital raising
for expansion, potentially enhancing the company's appeal to lenders and investors.

In the early stages of the cycle, both businesses shared a strong upward trend of nearly 40% for HPG and
50% for HSG. However, both are affected by the Covid pandemic (2021-2022) with growth rates falling to
130% and less than 100% in 2022, respectively. During this period, total assets decreased sharply due to
Short-term assets decreased, while HSG's decrease in short-term assets was generally stronger than HPG's.
The long-term assets of the two businesses recorded contrasts. While HPG both recorded a steady increasing
trend throughout the cycle, the opposite was recorded for HSG. This shows that the growth and asset
investment trend at HPG is more stable, and the decline in fixed assets at HSG may affect the development
of the business in the long term.
In general, these two trends are very similar during the pandemic period when the total assets and fixed
assets of both decreased, but after that, HPG came back stronger than HSG when the total HPG's assets
increased to 140% by 2023 compared to 100% in 2020.

In the period from 2020 to 2021, Hoa Sen's short-term debt increased sharply but then decreased
significantly to below 70% in 2022. On the other hand, Hoa Phat's short-term debt remained stable during
the same period. This difference can be attributed to the fact that the capital needed to maintain production
activities at HPG is larger than at HSG. Looking ahead to 2023, HPG's long-term debt is expected to
decrease slightly to 66%, while HSG's will decrease sharply to 0%. This suggests that HSG Enterprises may
have been successful in enhancing profits and free cash flow, or may have changed to a business model with
less capital investment. Generally, the long-term debt growth rates of the two companies have shown a
steady downward trend over the years. This trend could be seen as a positive signal indicating reduced
financial burdens, but it also carries potential risks, such as lack of investment capital and missed business
opportunities.
However, the reasons leading to the growth of the two businesses are somewhat similar. The equity of HPG
and HSG has continuously increased from 100% to 174% and from 100% to more than 160% in 2023,
respectively. This upward trend in equity for both companies shows positive signs. It is important because
growing businesses with expanding operations, profits, better solvency, and less dependency on loans are
more attractive to customers and investors, and they can easily mobilize capital for business activities.

3.2 Income statement analyis

- HPG's net sales revenue has fluctuated over the period. It increased significantly from 2020 to 2021 (by
around VND 60 trillion) but then decreased in 2022 (by around VND 9 trillion) and again in 2023 (by
around VND 20 trillion). It can be seen that HPG's net sales are strongly affected by the covid-19 epidemic,
along with changes in raw material prices.
- Cost of good solds surged from around 70 trillion in 2020 to over 100 trillion in the next 3 years which
indicates the difficulties the company has to encounter in the period.
- Gross profit saw a similar pattern as net sales and cogs. It increased significantly in 2021, went from
around 18 trillion in 2020 to around 41 trillion in 2021, before decreasing to 16 and 12 trillion in 2022 and
2023, respectively. This shows that despite a period of significant growth in 2021, HPG's performance has
been impacted by recent economic hardships and the Covid-19 pandemic.
- Financial income increased from 1 trillion in 2020 to around 3-4 trillion in the next 3 years meaning that
the short term investments and the marketable securities all generated cash for the company.
- The total expense rise year by year until 2022, then 2023 it witnessed a mild drop. The higher expense,
along with the decrease of net sales after 2021 indicates that 2022-2023 was a difficult time for the
company, dealing with several problems.

- The EPS was 2728VND in 2020, then rocketing to 7166VND in 2021 before going down to over
1000VND in 2022-2023. This also shows that the business was doing well before the covid-19 epidemic but
it has been affected since then.

4. Cash Flow Statement Analysis:

4.1. Cash flow from Operating activities

HPG's cash flow from operating activities during the 2020-2023 period exhibited significant volatility. The
year 2020 started with a healthy figure of VND 11,587 billion. This amount impressively doubled in 2021,
reaching VND 26,720 billion. However, the following years witnessed a concerning reversal. Cash flow
from operations steadily declined, reaching a level even lower than 2020 in 2023 (VND 8,643 billion). This
trend suggests potential challenges in the post-pandemic market environment influenced by various
macroeconomic factors. Additionally, it could indicate inefficiencies within HPG's core business operations
that need to be addressed to ensure sustainable cash flow generation in the future.
HPG's cash flow from operating activities experienced a significant decline in 2022 due to a confluence of
factors. Firstly, adjustments to operating profit due to changes in working capital resulted in a sharp drop
from VND 44,209 billion in 2021 to VND 19,291 billion in 2022. This decline was further exacerbated by
increased losses from investment activities, reaching VND 171 billion. Secondly, a substantial negative
payable cash flow of VND 14,666 billion further squeezed cash flow. This rise in payables is partly a
characteristic of the steel industry, which requires continuous large-scale production. While the significant
improvement to a positive VND 2,609 billion in 2023 suggests a recovery, the initial negative figure
indicates a period of delayed payments to suppliers, likely caused by the combined effects of lower profits
and the need to maintain production. Addressing these challenges and potentially restructuring working
capital management will be crucial for HPG to ensure future cash flow stability.

The recent decline in HPG's cash flow from operating activities (CFO) can be attributed to several key
factors. However, this trend offers a nuanced picture. Stricter controls over revenue streams (sales and
service provision) and input costs (raw materials) are crucial for effective CFO management. Optimizing
these aspects will ensure stable cash flow in the long run. Nonetheless, the negative CFO can also be
interpreted positively. It suggests the company is reinvesting in its core business through increased spending
on operations and maintenance. This could be a strategic move to lay the groundwork for future profit
growth. To achieve a balance, HPG needs to implement measures that improve both cost control and
operational efficiency, leading to a sustainable and healthy cash flow position.

4.2. Cash flow from Investing activities

HPG's investment activities from 2020 to 2023, particularly in 2021, witnessed a significant increase in cash
allocated towards non-current assets. This primarily involved investments in fixed assets like machinery,
buildings, and land. Additionally, the cash flow was used to recover investments in other entities and loans
granted, as well as purchasing debt instruments. This trend highlights HPG's commitment to expanding its
fixed asset base, likely to support production and overall business activities. Notably, the continued increase
in spending on fixed assets in 2022 and 2023 suggests a sustained focus on expansion through infrastructure
development
It is especially clearly seen that cash flow from Hoa Phat's investment activities is continuously negative
throughout the period 2020-2023. This mainly comes from the company's strong investment strategy in new
projects in the fields of steel, minerals and real estate.
Specifically, in 2020: Hoa Phat invested VND 22,400 billion in new projects, including Dung Quat 2 Iron
and Steel Complex project, Song Ma iron ore mining and processing area project, etc. 2021: Hoa Phat
continues to invest 35,200 billion VND in new projects, mainly focusing on Dung Quat 2 Iron and Steel
Complex. 2022: Hoa Phat invests 28,100 billion VND in new projects, including Song Ma iron ore mining
and processing zone project, VSIP Hai Phong 2 Industrial Park project, etc. 2023: Hoa Phat plans to invest
VND 25,000 billion in new projects, focusing on completing Dung Quat 2 Iron and Steel Complex and real
estate projects.
These large-scale investments have resulted in significant cash outflows, far exceeding investment proceeds.
While this trend may be cause for concern, it is important to recognize this is part of a long-term growth
strategy. Hoa Phat is laying the foundation for future expansion and expects these investments to bring
significant profits in the coming years. However, it is essential to closely monitor the performance of these
projects and ensure they are in line with the company's financial capabilities and risk tolerance to maximize
potential benefits while reducing minimize potential risks. In addition, Hoa Phat should consider optimizing
its investment portfolio and seek opportunities to divest non-core or ineffective assets to improve overall
capital allocation efficiency.
4.3. Cash flow from Financing activities
HPG's cash flow from financing activities exhibited significant volatility throughout the 2020-2023 period.
The initial two years (2020-2021) saw positive cash flow driven by activities like issuing shares (VND 12
billion) and receiving capital contributions from non-controlling shareholders. This strategy increased cash
flow for reinvestment in production and business expansion. Additionally, lower dividend payouts (VND -
3.112 billion) and debt repayments (VND -187.255 billion) compared to later years contributed to this
positive trend. However, this approach may have left some debt and interest burdens unaddressed.

The following two years (2022-2023) witnessed a shift. Notably, 2022 recorded the only negative cash flow
in the period. However, this can be viewed as a strategic restructuring effort. The company prioritized debt
reduction by focusing on principal repayments. Additionally, increased dividend payouts (nearly double that
of 2020) were used to incentivize investors. Essentially, 2022 served as a year of financial consolidation,
addressing outstanding liabilities and attracting investment. This approach paid off in 2023 with a significant
near-8 trillion VND positive swing in cash flow from financing activities.

5. Ratio analysis

5.1 Liquidity ratios

Current ratio

HPG has consistently maintained a current ratio above 1, indicating that the company has sufficient current
assets to cover its short-term liabilities. The stability of the current ratio over the past four years
demonstrates the company's steady short-term solvency and efficiency. However, the company's use of
working capital is suboptimal and lacks motivation for short-term growth.

Furthermore, when compared to rival company HSG, HSG's current ratio has consistently been higher than
HPG's from 2020 to 2023. Specifically, HSG's current ratio ranged from 1.3 to 1.72, while HPG's current
ratio ranged from 1.09 to 1.16 during the same period. This indicates that HSG has a better ability to pay
short-term debts than HPG. Both companies' current ratios slightly increased over this period, suggesting
that both companies are becoming more efficient in managing their short-term liabilities.
Quick ratio - Acid test ratio

In the first two years, HPG had better short-term liquidity than HSG, as evidenced by the slightly increasing
trend of the Quick Ratio and the higher Quick Ratio level compared to HSG during this period. However,
over the next two years, HSG's quick liquidity improved, with the figure rising from 0.35 in 2020 to 0.44 in
2023, while HPG's Quick Ratio decreased by nearly 0.1 units during the same period. This difference might
be attributed to reasons such as HSG having a better financial structure than HPG in the last 2 years, as well
as HPG having higher inventory and receivables ratios. Both companies' Quick Ratios are lower than the
average of the Vietnamese steel industry, which is 0.5. This indicates that the short-term solvency of both
companies can be enhanced. Currently, HPG's Quick Ratio is significantly lower than the industry average
and has tended to decrease in the last 2 years, indicating a weakness in the company's short-term liquidity
that requires attention.

Collection period

The collection period for HPG decreased from 2020 to 2021 and then increased over the next two years. The
decrease in collection days in 2020 and 2021 indicates that the company focused on overcoming its debt
settlement and collection policies, leading to increased revenue. However, the increase in collection days in
the following years suggests that the company's ability to collect short-term debts was poor, indicating
mismanagement of debts and high customer debt levels affecting the company's cash flow. Comparing the
collection period numbers with those of similar companies, it appears that HPG's cash collection policy is
relatively less risky. In 2021, the collection period for HPG peaked, likely due to credit purchases by end-
users in both foreign and domestic markets in response to the negative impact of the pandemic.
Day to sell inventory

Days sales inventory

130.00
125.00 121.11
120.00 117.51 115.55
115.00 114.35
115.00
110.00
105.00 101.22
100.00
95.00
90.00
83.00 84.24
85.00
80.00
2020 2021 2022 2023

HPG HSG

HPG's days of inventory sales have remained relatively stable over the past four years, averaging around 116
days. However, a high number of sales days indicates ineffective inventory management, leading to stagnant
and unsold inventory. The company should implement strategies to expedite inventory turnover. In
comparison, HSG's sales days fluctuated from 2020 to 2022, then increased in the following year, but
remained lower than HPG's throughout the period. This suggests HSG's efficiency, stability in inventory
management, and ability to adapt to market changes.

5.2 Efficiency ratios

Inventory turnover:
While inventory turnover saw a significant rise from 2020 to 2022, with the highest increase at 3.25 times in
2022, a slowdown is evident in 2023. The initial surge suggests a successful sales strategy, effectively
liquidating a large portion of inventory. However, the lower turnover in 2023 indicates a potential shift
towards sluggish sales and stagnant inventory. This raises concerns, as stagnant inventory is susceptible to
obsolescence, perishability, and quality degradation. Additionally, unsold inventory ties up capital, hindering
a company's liquidity.

Cash turnover:
Cash flow experienced a dip from 9.88 to 7.82 between 2020 and 2021. However, it rose steadily over the
following years, reaching 11.56 in 2023. This later increase might be partly attributed to the company using
a portion of its mortgage funds as loan collateral. Interestingly, the decrease in cash flow turnover during the
initial period (2020-2021) could be a positive sign. It suggests improved business efficiency, potentially
indicating faster customer payments and smoother operations.

Asset turnover ratio:

Although total asset turnover decreased in the following years (2022-2023), it initially increased in 2021.
Although the company has been performing well, generating a lot of revenue and having a lot of cash
flowing in 2019, this decrease may indicate that the company has been using its assets inefficiently in recent
years. Lower asset turnover may indicate a slowing rate of revenue generation or less efficient conversion of
assets into revenue.

5.3. Long-term solvency ratios

Total debt to equity

Hoa Phat Group's debt-to-equity ratio skyrocketed from 25.21% in 2020 to 46.04% in 2021, despite a sharp
decrease to 9.09% in 2022. This rapid rise coincides with the company's restructuring and establishment of
Hoa Phat Electrical Appliances Corporation, suggesting a significant increase in capital needs. While debt
can be a financing tool, a high debt ratio in 2021 raises concerns about potential liquidity issues and the
company's ability to service its debt obligations in the future. Compared to HSG, HPG shares the same
statistical progression but HPG has a higher leverage ratio than HSG during the period.
Long-term debt to equity

Long-term debt to equity of HPG and its competitors tends to decrease in the 4 years 2020-2023, from
2.22% to 1.83% and from 2.46% to 1.61%, in HPG started with long-term debt. The term on equity is lower
than the competitor company but higher after 4 years, this shows that the company depends on long-term
loans more than the competitor, leading to the company having to bear more risks. payment, financial
burden, and can be sensitive to interest rate fluctuations, but in return, if HPG can stabilize the above issues,
it will help increase the company's profits thanks to loan capital to finance for high-profit investments,
helping to increase profits for shareholders

Times interest earned

Both HPG and its competitor, HSG, boasted impressive financial health in the first two years. As evidenced
by their high times interest earned (TIE) ratios (7.81 and 14.37 for HPG in 2020 and 2021, respectively),
both companies demonstrated strong cash flow management, stable operations, and the capacity to
comfortably service debt. However, the following years painted a contrasting picture. While HPG's TIE ratio
declined, it remained above 2 in 2023, suggesting continued debt management capabilities. HSG, on the
other hand, experienced a steeper decline, reaching a worrying 0.9 in 2023. This significant drop suggests
potential challenges, such as a decline in revenue or a rise in debt and interest expenses. HSG's situation
raises concerns about their long-term ability to meet debt obligations, contrasting with HPG's relatively
stable position.

5.4 Profitability ratios

ROA and ROE

Hoa Phat Group's performance in the first two years (2020-2021) was impressive. High Return on Assets
(ROA) of 22.26% and Return on Equity (ROE) of 46.06% in 2021 indicated efficient asset utilization,
strong profitability, and sound business operations. However, the following two years witnessed a significant
reversal. ROA plummeted from 22.26% to 3.82% by 2023, suggesting a decline in asset effectiveness.
Similarly, ROE dropped sharply from 46.06% to 6.88% in 2022, reflecting a decrease in the company's
ability to generate returns from shareholder capital. Although these recent figures remain above industry
averages (3.4% ROA, 5.88% ROE), the consecutive declines raise concerns about the long-term
sustainability of Hoa Phat Group's profitability and capital use efficiency.

The company's gross profit margin has exhibited a worrying trend over the past three years. After
reaching a high of 27.46% in 2021, it has steadily declined, ending the period at a meager 10.88%. This
significant drop suggests potential issues within the company's operations. Reduced operating efficiency,
characterized by higher production costs or resource waste, could be a contributing factor. Additionally,
fierce competition from rivals may have forced price reductions to maintain market share, further squeezing
margins. The ongoing economic recession following the pandemic might also be playing a role, with
decreased consumer demand hindering pricing power. Addressing these challenges will be crucial for the
company to regain profitability and return its gross profit margin to a healthy level.
HPG's operating profit margin: Mirroring the gross profit margin, HPG's operating profit margin enjoyed
a peak of 25.16% in 2021 before steadily declining to 8.13% by 2023. This suggests a potential decrease in
operational efficiency. However, compared to HSG, whose operating profit margin fluctuated between 0%
and 11%, HPG has consistently demonstrated superior efficiency in core business activities. This is further
emphasized by the average gap of approximately 5 times in recurring operating profit margin between the
two companies. While HPG's net profit margin consistently exceeded the industry average for four years,
this might be attributed to lower-than-average income tax expenses rather than core business profitability.
Net Profit Margin: Like the trends observed in gross and operating profit margins, the net profit margin
also experienced a significant rise, reaching a peak of 23.06% in 2021. This indicated effective operations,
strong cost control, and the generation of higher returns for shareholders. However, the past two years saw a
sharp decline, with the average net profit margin plummeting to a mere 5%. This worrying drop could be
attributed to several factors, including rising operating costs, increased financial expenses like higher
interest rates, or even a decline in overall revenue.
7.5 Market value ratios

P/E and EPS: HPG and HSG's P/E and EPS

in 2020 and 2021 were both quite low (11.18
and 2.67 for HPG, 9.84 and 1.54 for HSG,
respectively), accompanied by high EPS,
indicating that both companies were
performing well during this period. However,
the following two years showed the opposite
trend, with HPG's P/E increasing sharply (19.19 for 2022 and 25.17 for 2023) and EPS decreasing
(fluctuating around 1,000), indicating that the company's business performance was quite difficult during
this period. In the meantime, HSG had negative P/E and EPS in 2022 and a slight recovery in 2023, also
showing the same thing. Both HPG and HSG experienced a significant decline in their EPS in 2022. This

was due to a number of factors, including: The COVID-19 pandemic caused a worldwide economic
downturn, which reduced demand for steel and other construction materials; the prices of raw materials such
as iron ore and coal increased sharply in 2022; the war in Ukraine has disrupted supply chains and caused
further increases in energy prices. Overall, the P/E and EPS trends for HPG and HSG reflect the challenges
that the companies and the steel industry have faced in recent years. However, both companies are still well-
positioned for long-term growth.
Earnings yield: Earnings yield surged from 8.95% in 2021 to 37.48% in 2022. however, it also decreased
significantly to 5.21% in 2022 and reaching its low at 3.87% in 2023. This shows that company was doing
well in 2020-2021 before dealing in a difficult period thus a decrease in profits (2022-2023)
Dividend yield: The dividend yield increased from 1.14% (2020) to 2.51% in 2021, while it was 0% in
2022-2023. This indicates that the company was performing well in 2020-2021 but the situation was not
really good in the following two years.
Dividend payout rate: The dividend payout rate decreased from 12.7% (2020) to 6.69% in 2021 before
staying at 0% in the next 2 years. This also shows that the company was doing well in 2020-2021 but it had
been tough for them in 2022-2023.
P/B ratio: 2020: The P/B ratio for HPG was 2.47 in 2020. This was above the average P/B ratio for the steel
industry in Vietnam at that time, which was around 1.5. This suggests that the company was relatively
overvalued in 2020. 2021: The P/B ratio for HPG fell to 0.98 in 2021. This was due to a decline in the
company's stock price and an increase in its book value per share. The P/B ratio for HPG was still above the
average P/B ratio for the steel industry in Vietnam at that time, but it was lower than the company's P/B ratio
in 2020. This suggests that the company was less overvalued in 2021 than it was in 2020. 2022: The P/B
ratio for HPG increased to 1.70 in 2022. This was due to a recovery in the company's stock price. The P/B
ratio for HPG was still above the average P/B ratio for the steel industry in Vietnam at that time, but it was
lower than the company's P/B ratio in 2020. This suggests that the company was less overvalued in 2022
than it was in 2020, but it was still relatively overvalued. 2023: The P/B ratio for HPG fell to 1.64 in 2023.
This was due to a further decline in the company's stock price. The P/B ratio for HPG was still above the
average P/B ratio for the steel industry in Vietnam at that time, but it was lower than the company's P/B ratio
in 2020 and 2022. This suggests that the company was still relatively overvalued in 2023, but it was less
overvalued than it was in 2020 and 2022.

6. Return on Invested Capital analysis

NFO: The company had negative NFO in 2019, but in 2020 it increased significantly to 45 billion VND,
and it fluctuates around 30-40 billion VND in the period 2020-2023. This suggests that the company
has taken on more debt or financial obligations to finance its growth or activities. However, since the
company's net operating assets have also been increasing, it has the capacity to generate future revenue and
manage its financial obligations. Positive NFO helps Hoa Phat access loans with lower interest rates,
enhance its competitiveness in the market but it can also make Hoa Phat riskier if the value of the company's
financial assets declines.

Net Operating Assets (NOA) of HPG exhibits an impressive growth trajectory from 2020 to 2023, surging
from VND 5,738 billion to VND 146,000 billion. However, the company's operational efficiency witnessed
a slight decline in the latter period, as evident in the decreasing trends of NOPAT margin, NOA turnover, and
ROA. While revenue and EBIT demonstrated an upward trend until 2021, they experienced a downturn in
2022 and 2023, suggesting a potential negative impact of the business environment on HPG's operations.
The growth in NOA indicates an expansion in the scale of HPG's operations. Nevertheless, the deteriorating

operational efficiency metrics warrant close monitoring.

HPG's RNOA exhibited a remarkable upward trend from 2020 to 2021, reaching a peak of 29.36% in 2021.
This impressive performance reflects the company's efficient utilization of its assets to generate profits
during a period of favorable market conditions. However, RNOA experienced a decline in 2022 and 2023,
falling to 6.47% and 4.88%, respectively. HPG's NOPAT mirrored the trend of RNOA, surging from 2020 to
2021 and then declining significantly in 2022 and 2023 while HPG's effective tax rate fluctuated between
6.84% and 14.90% during the period. Overall, the decreasing RNOA and NOPAT values suggests that the
company is in a tough financial position as HPG's efficiency in generating profits has diminished after
reaching its peak in 2021

Based on the provided table, the company's Return on Common Shareholders' Equity (ROCE)
experienced significant fluctuations over the four years from 2020 to 2023. The peak ROCE of 42.95% in
2021 was driven by a strong combination of a healthy profit margin and efficient asset utilization. However,
the ROCE declined to 10.15% in 2023, indicating potential challenges faced by the company. This decline
can be attributed to a decrease in both profit margin and asset turnover. While leverage remained relatively
stable throughout the period, it's crucial to further investigate the underlying factors contributing to the
ROCE fluctuations.

7. Credit analysis
Capacity:
Hoa Phat Group was founded in 1992 by Mr. Tran Dinh Long, starting as a private enterprise trading in
construction machinery. Thanks to an effective development strategy and professional corporate
management, Hoa Phat has gradually affirmed its position, becoming the largest steel manufacturer in
Vietnam with an output of more than 17 million tons of steel/year. Hoa Phat constantly diversifies its
activities into fields such as agriculture, real estate, household appliances, and construction materials. With a
solid foundation and brand reputation, Hoa Phat always actively contributes to the community, affirming its
position as a leading enterprise in Vietnam.
Collateral:
The value of Hoa Phat's collateral assets is always higher than the loan value, ensuring the safety of the
Group's loans. According to the 2022 consolidated financial report, Hoa Phat has a total short-term and
long-term loan balance of VND 57,900 billion. Of which, the value of tangible fixed assets mortgaged is
46,291 billion VND, the value of mortgaged inventory is 15,600 billion VND. In addition, Hoa Phat also
uses short-term receivables and cash equivalents as collateral for loans. Using many different types of assets
as collateral for loans helps Hoa Phat minimize payment risks and ensure the safety of the Group's business
operations.
Covenants:
Hoa Phat Group, Vietnam's leading private enterprise, operates in multi-industry with steel as its core field,
always committed to bringing good value to customers, shareholders and the community. High quality
products, competitive prices and dedicated service are top priorities. Hoa Phat ensures transparent
management, reasonable profit sharing and increased stock value for investors. Furthermore, the Group is
also committed to protecting the environment, developing the community, 9building a national brand and
implementing many social security policies. With these commitments, Hoa Phat affirms its position as a
reputable and responsible enterprise, contributing to the sustainable development of the community and the
country.
Character:
The Board of Directors of Hoa Phat Group is marked by its intelligence, strategic vision, and market
understanding. They put the Group's interests first, act transparently, and take responsibility. Dedication,
passion for development, and dedication are outstanding qualities. They promote the spirit of cooperation,
solidarity, respect, and listening to opinions. Thanks to that, the Board of Directors contributes to Hoa Phat's
success, affirming its position as a leading enterprise in Vietnam.

8. Conclusion
The research paper on Hoa Phat Company examines the balance sheet, income statement, cash flow
statement, ratio analysis and compares them to Hoa Sen Group for the years 2020 to 2023. The Covid-19
pandemic, the war in Ukraine, the increased price of raw material, all combined for a negative impact on
business operations. In response to challenges, the company implemented strategic actions to strengthen its
financial position, reduce the risk of default, navigate difficult periods, and capture a larger market share. A
breakdown of the financial ratios follows.
Liquidity: Although the company is in a good financial position, it should address its debt situation through
better solvency and management practices to maintain a reliable cash flow.
Efficiency: The efficiency ratios fluctuate and decrease a little bit indicating that this was a tough period for
the company
Solvency: Solvency is improving, with a declining debt-to-equity ratio. However, the high LTD to equity
ratio indicates significant reliance on long-term debt, which means a greater risk. This includes potential
challenges with repayments, increased financial strain, and vulnerability to interest rate fluctuations.
However, effective management of these issues can turn this strategy into an advantage. By leveraging loan
capital for high-return investments, HPG can potentially boost profits for shareholders.
Profitability: Profitability has declined in recent years, with lower ROE, ROA and net profit margins all
decreased in the period 2022-2023.
Market value: P/E ratio suggests potential overvaluation in the past, with a correction reflected in the recent
stock price decline. HPG's stock price has fallen in recent years, reflecting a decrease in both earnings and
dividend payouts. This may be an attractive entry point for investors who believe the company can recover.
The indicators and information presented in the report demonstrate that the company experienced favorable
business performance during the period of 2020-2021. However, in the past two years, the company has
encountered significant challenges stemming from the impacts of the COVID-19 pandemic, the conflict in
Ukraine, and other factors such as the higher price of raw materials... Consequently, the company and the
steel industry as a whole have faced numerous obstacles and are currently in the process of recovery.
Reference:
- Financial Report of Hoa Phat company: https://www.hoaphat.com.vn/
- Financial Report of Hoa Sen group: https://hoasengroup.vn/vi/trang-chu/
- Data from SSI iboard: https://iboard.ssi.com.vn/analysis/fundamental-analysis
- https://cafef.vn/
- https://www.investing.com/
- https://vietstock.vn/
- textbook-Financial Statement Analysis by K.R. Subramanyam-11e