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Lecturer: Tran Thi Hoang Vi Contributors

Lecturer: Tran Thi Hoang Vi Contributors. Nguyen Thi Ngoc Tram Nguyen Cam Tu. Nguyen Xuan Truong Nguyen Thi Phuong Thanh. Contents. Company Introduction. Q & A. Answering questions of lecturer and classmates. Introduction Establishing history Nature of business Organization.

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Lecturer: Tran Thi Hoang Vi Contributors

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  1. Lecturer: Tran Thi Hoang Vi Contributors Nguyen Thi Ngoc Tram Nguyen Cam Tu Nguyen Xuan Truong Nguyen Thi Phuong Thanh

  2. Contents Company Introduction Q & A Answering questions of lecturer and classmates Introduction Establishing history Nature of business Organization Common-size Analysis Activity Ratios Liquidity Ratios Solvency Ratios Profitability Ratios Dupont Analysis Revenue/ Net income/Total Equity Introduce peer company In comparison with other listed pharmaceutical companies Financial Statements Analysis

  3. COMPANY INTRODUCTION 01

  4. Company Overview Company name: DHG Pharmaceutical Joint-Stock Company Abbreviation: DHG PHARMA Headquarters: 288 Bis Nguyen Van Cu, An Hoa Ward, NinhKieu District, CanthoCity Vision: “For a more beautiful and healthier life” Mission: DHG Pharma always provides high quality products and services to satisfy the aspiration for a more beautiful and healthier life Website: http://www.dhgpharma.com.vn Chartered capital: 653,764,290,000 VND

  5. Establishment Establishing History Precursor of DHG Pharmaceutical Joint-Stock Company was 2/9 Pharmaceutical Factory and was founded on 02 September 1974 at Kenh 5 Dat Set, Khanh Lam Commune, U Minh District, Ca Mau Province The 2/9 Pharmaceutical Factory was assigned to be under the management of HauGiang Health Service People’s Committee of HauGiang Province decided to merge the Material Medical Supply Company into HauGiang Pharmaceutical United Factory 1975 1988 HauGiang Pharmaceutical United Factory was founded basing on the consolidation of 3 units: State-owned Pharmaceutical Factory, Level 2 Pharmaceutical Company and Herbal Medicine Station HauGiang Pharmaceutical United Factory was equitized to become DHG Pharmaceutical Joint-Stock Company 1982 2004

  6. Organization

  7. Director • Mrs. Pham Thi Viet Nga • Chairperson of DHG Pharma and VinhHao Algae JSC • PhD of Business Administration • BSc Pharmacy • Leading DHG Pharma to the best pharmaceutical brand in Vietnam with an increase of 4.5 times in revenue and 7.5 times in profit after 7 years equitization • Awarded one of Top 50 businesswoman of Asia in 2013 by FORBES Magazine

  8. Scope of business Leading position in Vietnam pharmaceutical industry for 17 successive years since 1996

  9. Products 12 invested brands account for over 50%ofthe sales of the whole company

  10. Diagram of market breakdown

  11. 02 IN COMPARISON WITH OTHER LISTED PHARMACEUTICUAL COMPANIES

  12. IN COMPARISON WITH OTHER LISTED PHARMACEUTICUAL COMPANIES (2012) Growth Rate

  13. IN COMPARISON WITH OTHER LISTED PHARMACEUTICUAL COMPANIES (2012)

  14. IN COMPARISON WITH OTHER LISTED PHARMACEUTICUAL COMPANIES (2012)

  15. IN COMPARISON WITH OTHER LISTED PHARMACEUTICUAL COMPANIES (2012)

  16. 03 Common-size analysis

  17. Assets structure

  18. Capital Structure

  19. Common-size Income Statement

  20. Common-size Cash-flow Statement

  21. 04 Ratios analysis Activity ratios Liquidity ratios Solvency ratios Profitability ratios

  22. Activity ratios analysis Short Term Activity Ratios 1. Inventory Turnover Measure from 2010 to 2012 nearly 3.0 times per year, the entire inventory of DHG was sold and replaced. Inventory turnover 2. Days of inventory on hand Lower level of inventory turnover will result in higher days of inventory on hand ratio DOH • Comparing to the ratio of Health Care Industryand PMC Company, The lower rates of inventory turnover as well as the higher rate of DOH from 2010 to 2012 show: • DHG had adequate inventory and was prevented from the shortages, but it was a bad sign because products tended to deteriorate as they sit in a warehouse. • Ineffective inventory management could lead to overstocking, deficiencies in the product line or marketing effort Source of Industry and PMC data: cophieu68.vn

  23. Activity ratios analysis Short Term Activity Ratios 3. Receivables Turnover Measure from 2010 to 2012 nearly 5.4 times per year, the entire receivables of DHG was collected theoretically Receivables turnover 4. Days of sales outstanding Lower level of receivable turnover will result in higher days of sales outstanding Days of sales outstanding • The Increase in accounts receivable turnover overtime indicates the improvement in process of cash collection on credit sales. • Receivables turnover of PMC (10.83 – 12.28) was nearly double DHG’s (5.32 – 5.51) (as well as the opposite side with DSO) show that DHG was taking longer to collect money from customer. The company’s credit or collection policies was not too stringent

  24. Activity ratios analysis Short Term Activity Ratios 4. Payables Turnover Measure from 2010 to 2012 nearly 14 times per year, the company pays of all its creditors Payables Turnover 5. Number of days of payables Lower level of payables turnover will result in higher number of days of payables turnover N Having high liquidity in comparing with industry, the lower payables turnover ratio of DHG when comparing with PMC shows that the company was exploiting the leniency in lending policy of suppliers

  25. Activity ratios analysis Short Term Activity Ratios • 0 < Working Capital Turnover: DHG Company had enough short term assets to cover its short term debt • Working Capital Turnover > 2 : DHG Company had too much inventory and was not investing excess assets.

  26. Activity ratios analysis Long Term Investment Activity Ratios

  27. Liquidity ratios analysis 1 < Commonly acceptable current ratio <2 Current ratio measure 2.74, 3.06, 2.74, 2.78 VND in current assets for every 1 VND in current liabilities at the end of 2009,2010,2011 and 2012 respectively. The current ratio was too high (>2) The company had high level of liquidity but may not was using its current assets or its short-term financing facilities efficiently Source of Industry Data: cophieu68.vn

  28. Liquidity ratios analysis Commonly acceptable quick ratio > 1 Quick ratio measure 2.02, 2.31, 1.76, 1.98 in current assets after excluding inventory for every 1 VND in current liabilities at the end of 2009,2010,2011 and 2012 respectively Source of Industry Data: cophieu68.vn

  29. Liquidity ratios analysis Because cash ratio is the most stringent and conservative of the three liquidity ratios (current, quick and cash ratio)  Cashratio > 1 in 3 years: 2009,2010 and 2012 indicates that DHG Company had enough cash/ cash equivalent to pay off all current obligations easily  DHG has high liquidity

  30. Liquidity ratios analysis

  31. Solvency ratios analysis Debt ratios Debt to assets ratio < 0.5 measure that most of the company’s assets were financed through equity  Company has more opportunities to borrow in the future at no significant risk.  Source of Industry Data: cophieu68.vn

  32. Solvency ratios analysis Debt ratios Debt to capital ratio measure 33%, 29%, 30%, 29% of DHG’s capital represented by debt in 2009,2010,2011 and 2012 respectively

  33. Solvency ratios analysis Debt ratios 0(Liabilities = Equity) < Optimal debt to equity ratio < 0.5 - 1 1 (Liabilities = Equity) < Optimal financial leverage ratio < 1.5 - 2 Average ratio indicates that DHG company was talking advantage of the increased profits that financial leverage may bring Source of Industry Data: cophieu68.vn

  34. Profitability ratios analysis DHG and PMC have the different trends in gross profit margin within 4 years The DHG’s gross profit margin is much higher than PMC in this period (11% higher)  Per VND of safe of DHG can contribute more money for gross profit than PMC

  35. Profitability ratios analysis DHG and PMC have the different trends in net profit margin within 4 years. From 2009 to 2010, PMC showed a great rise in net profit margin (from 0.12 to 0.14), while DHG’s rate decreased slightly (from 0.2 to 0.19). In the period of 2011-2012, there are no change in net profit margin of each company, DHG still much higher than PMC 2%

  36. Profitability ratios analysis

  37. Profitability ratios analysis

  38. DuPont Analysis • Be used to analyze return on equity (ROE) • Uses basic algebra to break down ROE into a function of different ratios  analyst can see the impact of leverage, profit margins, turnover on shareholder returns. ROE x x x Net profit margin x Total asset turnover x Leverage ratio

  39. DuPont Analysis

  40. Conclusion • Earning leading revenue / net profit after tax, but almost DHG’s ratios in 3 years from 2009-2012 was not good as well as a small-scale company such as PMC and had downward trends in the future. • Shortcomings: • Inventory/ receivables management was not effective • The company had high level of liquidity but may not was using its current assets or its short-term financing facilities efficiently • ROA  The ability of attracting investor’s attention  If you are an administrator… If you are an investor…..

  41. Reference • Annual Report 2010 – 2011 -2012 of DHG JSC • Annual Report 2010 – 2011 -2012 of PMC JSC • Industry data : cophieu68.vn

  42. Q/A

  43. Thanks for your listening

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