VIETNAM NATIONAL UNIVERSITY – HOCHIMINH CITY
INTERNATIONAL UNIVERSITY
SCHOOL OF BUSINESS
BUSINESS ANALYSIS AND VALUATION
A Case of VIETNAM DAIRY PRODUCTS
JOINT STOCK COMPANY (VNM)
In Partial Fulfillment of the Requirements of the Degree of
BACHELOR OF ARTS in BUSINESS ADMINISTRATION
Student’s name: NGUYEN THI NGOC THU (BAIU09428)
Advisor: LE HONG NHUNG, Msc.
Hochiminh city, Vietnam
2013
BUSINESS ANALYSIS AND VALUATION
A case of VIETNAM DAIRY PRODUCTS JOINT STOCK
COMPANY (VNM)
APPROVED BY: Advisor
APPROVED BY: Committee,
________________________
___________________________________
LE HONG NHUNG, M.Sc.
LE VINH TRIEN, Ph.D., Chair
___________________________________
LE HONG NHUNG, M.Sc., Secretary
___________________________________
ROBERT CONNOLLY, MBA.
___________________________________
LE QUANG MINH, Ph.D.
___________________________________
NGUYEN CANH TIEN, M.Sc.
THESIS COMMITTEE
ACKNOWLEDGMENTS
I would like to express my honors to all those who helped me totally accomplished my
thesis.
Firstly, I would like to express my special gratitude and deep regard to my advisor, MBA
Le Hong Nhung, who support and guide me with the precisely methods through the
process of my thesis for her enthusiasm and immense knowledge.
Secondly, I would like to grateful my entire teacher who taught me at the underlying
knowledge to the give me the general financial understanding to do the thesis well.
Additionally, I give my thanks to my friends who share with me all the knowledge and
feeling during this thesis period.
Lastly, I give all my heart to express my thankful to my family, my relatives who help me
and support me through the thesis period.
TABLE OF CONTENTS
LIST OF TABLES ........................................................................................................................ i
LIST OF FIGURES ..................................................................................................................... v
ABSTRACT .................................................................................................................................. vi
CHAPTER I: INTRODUCTION ................................................................................................ 1
1.1. Background and Rationale ............................................................................................. 1
1.2. Objectives and research question.................................................................................... 3
1.3. Scope and Limitation ...................................................................................................... 4
CHAPTER II: LITERATURE REVIEW AND METHODOLOGIES ................................... 5
2.1. Literature review ............................................................................................................. 5
2.1.1. Business strategy analysis........................................................................................ 5
2.1.2. Accounting analysis ............................................................................................... 10
2.1.3. Financial analysis .................................................................................................. 10
2.1.4. Prospective analysis ............................................................................................... 13
2.2. Methodologies ................................................................................................................. 16
CHAPTER III: INDUSTRY, COMPANY AND STRATEGY ANALYSIS .......................... 20
3.1. Industry analysis............................................................................................................. 20
3.1.1. Global industry analysis
................................................. 20
3.1.2. Domestic industry analysis .................................................................................... 23
3.1.3. Porter’s five forces analysis ................................................................................... 24
3.2. Company analysis ........................................................................................................... 29
3.2.1. Company overview ................................................................................................. 29
3.2.2. SWOT analysis ....................................................................................................... 34
3.2.3. Vinamilk’s strategy analysis .................................................................................. 36
CHAPTER IV: FINANCIAL STATEMENT ANALYSIS ..................................................... 44
4.1. Income statement analysis ............................................................................................ 44
4.1.1. Percentage change income statement analysis ..................................................... 44
4.1.2. Common size income statement analysis ............................................................. 53
4.2. Balance sheet analysis ................................................................................................... 54
4.2.1. Percentage change balance sheet analysis............................................................ 54
4.2.2. Common size balance sheet analysis .................................................................... 58
4.3. Statement of cash flow analysis .................................................................................... 61
4.4. Financial ratios analysis ................................................................................................ 63
4.4.1. Liquidity ratios analysis ......................................................................................... 63
4.4.2. Long-term solvency ratios analysis ...................................................................... 64
4.4.2. Assets management ratios analysis ...................................................................... 66
4.4.2. Profitability ratios analysis ................................................................................... 69
CHAPTER V: FORECASTING AND VALUATION ............................................................ 73
5.1. Forecasting ..................................................................................................................... 73
5.2. Valuation ....................................................................................................................... 107
CHAPTER VI: CONCLUSION AND RECOMMENDATION ........................................... 115
LIST OF REFERENCES ......................................................................................................... 116
APPENDICES ........................................................................................................................... 118
Forecast others variable for balance sheet ........................................................................ 118
Beta calculation.................................................................................................................... 126
LIST OF TABLES
1.
Table 1: Forecasting technique ........................................................................ 18
2.
Table 2: World milk production ....................................................................... 20
3.
Table 3: Milk consumption per capita ............................................................. 22
4.
Table 4: Vietnam real GDP growth and GDP per capita.................................. 23
5.
Table 5: The number of dairy cattle and domestic consumption per capita. .... 24
6.
Table 6: Vietnamese imports of milk and milk products. ................................ 25
7.
Table 7: Cow milk production .......................................................................... 26
8.
Table 8: Vietnam milk consumption per capita ................................................ 26
9.
Table 9: Vietnam population ............................................................................ 27
10. Table 10: Vinamilk breeding activities production .......................................... 42
11. Table 11: Vinamilk Average total energy consumption for producing products .
.......................................................................................................................... 42
12. Table 12: Liquidity ratio ................................................................................... 63
13. Table 13: Long-term solvency ratio ................................................................. 64
14. Table 14: Asset management ratio ................................................................... 66
15. Table 15: Profitability ratios ............................................................................. 69
16. Table 16: The capacity of VNM ....................................................................... 74
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17. Table 17: Vinamilk productivity ...................................................................... 74
18. Table 18: Revenue of liquid milk in domestic dairy industry .......................... 77
19. Table 19: Forecast growth rate of liquid milk’s revenue of VNM (2013 – 2017)
.......................................................................................................................... 78
20. Table 20: Revenue of powder milk in domestic dairy industry........................ 80
21. Table 21: Forecast growth rate of powder milk’s revenue of Vinamilk........... 82
22. Table 22: Yogurt revenue of domestic dairy industry ...................................... 83
23. Table 23: Forecast growth rate of powder milk’s revenue of Vinamilk........... 84
24. Table 24: Forecast Growth rate in sale of Vinamilk’s condense milk ............. 85
25. Table 25: Forecast growth rate in sale of Vinamilk’s others product............... 86
26. Table 26: Forecast growth rate in net sale of Vinamilk.................................... 87
27. Table 27: CPI growth compare to the Average CPI monthly of previous year ....
.......................................................................................................................... 87
28. Table 28: Purchasing price of domestic fresh milk material per liter............... 88
29. Table 29: Forecast percentage cost of liquid milk on liquid milk sales ........... 90
30. Table 30: Price of Vinamilk’s powder milk ..................................................... 91
31. Table 31: Forecast percentage cost of powder milk on powder milk sales ...... 91
32. Table 32: Forecast percentage cost of yogurt on yogurt‘s sales ....................... 92
33. Table 33: Forecast percentage cost of condense milk on condense milk sales 93
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34. Table 34: Forecast percentage cost of others products on others product sales ...
.......................................................................................................................... 94
35. Table 35: Forecast percentage total cost of goods sold on total net sales ........ 94
36. Table 36: Forecast financial income ................................................................. 96
37. Table 37: Forecast financial expense ................................................................ 96
38. Table 38: Forecast interest expense .................................................................. 97
39. Table 39: Forecast selling, general and administrative expense....................... 97
40. Table 40: Forecast Profit from other activities ................................................. 98
41. Table 41: Forecast Dividend paid ..................................................................... 98
42. Table 42: The financial variable assumption for income statement ................. 99
43. Table 43: Pro-forma Income Statement ............................................................ 99
44. Table 44: Forecast fixed assets turnover ........................................................ 100
45. Table 45: Forecast fixed assets ...................................................................... 101
46. Table 46: Depreciation expense to net fixed assets ........................................ 102
47. Table 47: Depreciation expenses .................................................................... 102
48. Table 48: Forecast Fixed capital investment .................................................. 103
49. Table 49: Forecast Account receivable turnover ............................................ 103
50. Table 50: Forecast Account receivable........................................................... 104
51. Table 51: Forecast Inventory turnover ........................................................... 104
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52. Table 52: Forecast Inventory .......................................................................... 105
53. Table 53: Forecast account payable turnover ................................................. 105
54. Table 54: Forecast account payable ................................................................ 106
55. Table 55: Working capital investment ............................................................ 106
56. Table 56: Calculate the Free cash flow to firm............................................... 109
57. Table 57: Valuation ........................................................................................ 111
58. Table 58: Forecast Cash and cash equivalent ................................................. 117
59. Table 59: Forecast short-term financial investment ....................................... 117
60. Table 60: Forecast others current assets ......................................................... 118
61. Table 61: Forecast Current asset..................................................................... 119
62. Table 62: Forecast Net Investment properties ................................................ 120
63. Table 63: Forecast Long-term financial investment ....................................... 120
64. Table 64: Forecast others long-term assets ..................................................... 121
65. Table 65: Forecast long- term assets .............................................................. 121
66. Table 66: Forecast other current liabilities ..................................................... 122
67. Table 67: Forecast current liabilities .............................................................. 123
68. Table 68: Pro-forma balance sheet ................................................................. 123
iv
LIST OF FIGURES
1. Figure 1: Dairy performance in 2012............................................................................ 2
2. Figure 2: Vinamilk’s net revenue and net profit ........................................................... 3
3. Figure 3: Michael Porter’s five forces .......................................................................... 6
4 Figure 4: Porter’s competitive strategy .......................................................................... 9
5. Figure 5: Milk production in major exporter-change from prior year ........................ 21
6. Figure 6: International dairy price index .................................................................... 22
7. Figure 7: Vietnam and East Asia and Pacific CPI average ......................................... 24
8. Figure 8: Vietnam dairy market share ........................................................................ 31
9. Figure 9: Liquid milk production ................................................................................ 31
10. Figure 10: Powder milk production .......................................................................... 32
11. Figure 11: Growth rate dairy consumption in domestic Urban and Rural. ............... 39
12. Figure 12: Global dairy price trend. .......................................................................... 41
13. Figure 13: Vinamilk’s net sale in domestic and export ............................................ 46
14. Figure 14: Vietnam core CPI .................................................................................... 48
15 Figure 15: Vinamilk’s capital structure ..................................................................... 60
16. Figure 16: The total fresh milk material of Vinamilk (millions of liters) ................. 75
17. Figure 17: Structure net revenue of Vinamilk .......................................................... 76
18. Figure 18: The global Skim Milk Price & Whole Milk Price................................... 89
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ABSTRACT
Business analysis and valuation is used to analyze the performance of an enterprise in the
past along with the economic and industry situation to measuring the intrinsic value of
stock price of that firm and determine how well the firm performance. In my thesis, I
analyze the consolidated financial statement of Vinamilk from 2008 to 2012 and the
financial ratio to determine how efficient Vinamilk performed it in all aspect about:
operating activities, investing activities and financing activities. The discount cash flow
model is used to measure the intrinsic value of Vinamilk stock’s price. Thereby, this is
the reference for those who want to invest in Vinamilk security.
vi
CHAPTER I
INTRODUCTION
1.1. Background and rationale
In recent year, the Vietnam dairy industry has grown significantly. Along with the
development of economy, the awareness of people about healthy products is enhanced.
The demand for dairy products in Vietnam is still high. According to the National
Institute of Animal Husbandry of Vietnam, the milk’s consumption in Vietnam went up
from 12.22 liter per person in 2005 to 15.7 liters per person in 2011, but it is lower than
other countries in Asia-Pacific region such as Thailand (40 liters per person) and China
(28 liters per person) and the average consumption in Asia.-pacific (97 liter per person) at
that year, so it is promising for the high demand in dairy products in Vietnam and it is
expected that the consumption of dairy products goes up from 20% to 25% per year.
Thus, it will be able to open the opportunity for the development of dairy enterprise.
Moreover, some regions in Vietnam has suitable climates and geological conditions for
dairy farming which can develop farms in large scale such as Moc Chau, Son La, Da Lat,
Lam Dong, Ba Vi, Ha Noi…Therefore, the dairy industry is the potential area in
Vietnam.
Another reason which implies the dairy industry in Vietnam is promising is that Vietnam
stock market is consider as the fast growing market, from the 2006 up to now, there are
more than 1000 enterprise listed on stock exchange. Moreover, the dairy stock
performance in 2012 is quite good which increase 56.15 % meanwhile the VN-INDEX
just go up 18.21% so That attracted many investors invest in dairy industry.
1
Figure 1: Dairy performance in 2012
(Sources: Bloomberg)
Up to now, there are more than 60 companies both domestic and foreign trading dairy
products in Vietnam with 300 trademarks. Vietnam dairy products Joint Stock Company
that was established in 1976 listed on the Ho Chi Minh City Stock Exchange on 19
January 2006 with the ticker: VNM and it was named as Vinamilk. The core business of
Vinamilk is produce dairy products. VNM is the giant in the Vietnam’s dairy enterprise
with made up more than 40% market shares including condense milk: 75%, liquid milk:
40%, yogurt: 73% and powdered milk: 19%. Vianmilk has been purchasing almost half
of domestic raw fresh milk, so that opens the chance for Vinamilk to control milk
material pricing. VNM has manufactory with the capacity far beyond that of other
competitors. Moreover, Vinamilk has invested to build up 3 new modern factories,
among them there are two biggest factories in Asia to adapt the demand of 3 main
regions in Vietnam and expand the export volume. Additionally, with the wide
2
distribution channel including 200,000 retailers and 250 distributors, Vinamilk is able to
be easy to approach the ending users.
The revenue of Vinamilk increase significantly during the period 2006-2012 with the
compounded annual growth rate (CAGR) at 26.5 % and the net profit increase with the
high ratio 43.7% per annum. In 2011, VNM reach 1 billion dollar in revenue and that is
importance point for Vinamilk to set up the target US$3 billion in revenue in 2017 and
to be in top 50 largest dairy companies in the world. Therefore, those numbers make the
impression on investors about the development of Vianmilk and besides the
development of Vietnam dairy industry, which are all the reasons why I choose this
industry for my study.
Figure 2: Vinamilk’s net revenue and net profit
1.2. Objective and question research
The objective of the study is to make the business analysis and valuation in the case of
Vietnam Dairy Products Joint Stock Company (VNM) to find the firm’s current position
3
and the future performance so that we can acquire the intrinsic value of VNM. This
research can help investors in answering the question whether they should invest in VNM
stock?
1.3. Limitation and scope
This study is just conducted and only use as a reference information for Vietnam dairy
products Joint Stock Company so that it is not used for others company in dairy products
industry.
4
CHAPTER II
LITERATURE REVIEW AND METHODOLOGIES
2.1 Literature review:
According to Krisna G. Palepu, Paul M. Healy, PhD, Victor L. Bernard, it take four steps
to perform a business analysis and valuation of a firm including: The First step is
business strategy analysis. The second is accounting analysis. The third step is financial
analysis. And the last one is prospective analysis.
2.1.1. Step 1: Business strategy analysis
Business strategy analysis is useful tool to identify key profitability for the industry in
general and the enterprise in specific. Moreover, it also determines the risks and the
potential growth of the firms. Business strategy analysis involves analyzing a firm’s
industry and its competitive strategy.
 Industry analysis used to deeply analyze the current real situation of the industry
in the domestic and global economy since then the profitability and difficulty of
an enterprise is determined. According to an article “ How Competitive Forces
Shape Strategy" (1979) written by Michael Porter, Porter’s five forces tool is the
good way to define the industry structure that lead you can determine the
company position in the present and future so that they can measure the
profitability of the business segment in the industry. Porter’s five forces comprise:
rivalry among existing firms, threat of new entrant, threat of substitute products,
bargaining power of buyers, bargaining power of supplier
5
Figure 3: Michael Porter’s five forces
Threat of new entrant: when the new entrant enter into an industry they can gain
the market share against those existing enterprise so that the competitions are more
strictly and the current cost is pushed lower. The existing of the barriers is able to prevent
the entry. The threat of new entrants is high if the barrier to entering into the industry is
intense. Therefore, the barrier to entry is the way to measure the threat of potential
competitor. If the various barriers such as the Economies of scale, the entry’s time and
cost, the loyalty of brand name, the product differentiation, capital requirement, and
government restriction…exist, it may prevent the entry of new players.
Rivalry among existing firms:
Rivalry among existing firms consider as the competition between established players in
an industry. The state of competition among existing company determines the firm’s
profitability. The stronger struggle among each player, the lower the return is. There are
some factors that affect the rivalry among existing firms within an industry:
6
 The amount of competitor: the competition is more intense when there
are many strong competitors within an industry
 The industry’s Competitive structure: if the market has the monopoly
enterprise that may have less competition.
 The loyalty of customers on brand name: the belief of customer on the
firm’s products can be weaken the threat among established firms
 Fixed cost allocation: when the fixed cost is high and the company is
used 100% of their capacity that leads to the strict competition among
those firms
 Industry Growth Rate: when the firms work on the fast growing market,
the competition is less intense. However, if the company belong to the
stagnant stage of industry, the rivalry is significant
 Switching cost: the lower the switching cost is , the more intense the
competitive is
 The range of existing barriers: the more difficult to leaving out the
industry, the more rivalry within them.
Bargaining Power of Buyers
Buyer stands for the people that use the end-product. Power of customer means as the
ability of buyer who can make pressure on the prices of company’s products or make
them raises their production cost by requiring many different demands on products so
that they can lower the profits of an industry. The power of buyer is considered as threat
when the small number of customers is able to can create the power to bargain down the
products price. The important customers are able to purchase a large amount of products
or services. The substitute for this products or services is plentiful and so on
Bargaining Power of Suppliers:
7
Suppliers refer to those that supply inputs for an industry. Powerful suppliers means as
those suppliers who have ability to raise the prices of inputs such as labor cost, raw
materials cost, etc. so it can squeeze the profitability of industry. The supplier is
considered as risk when: they work in products have a few substitutes. They are large
supplier or monopoly supplier. The high switching cost must be gone away for changing
to an alternative supplier. Their products are a necessary input for production.
Threat of Substitute products:
Substitute products are regarded as those things that can be easy to replace for another
one but it still satisfy the demand of customers. Substitute products create pressure on the
potential profits of an industry because the company may set up an impressive good price
to prevent the penetration of others substitute products that lead to lower profit. The
fewer the number of substitutes product are, the greater the opportunity for the firms in
industry can raise their product prices to earn high profits.
 Competitive strategy (Porter’s generic strategy) analysis:
The profitability of the firm is mostly affected by the strategy choices. Competitive
strategy is plan of the company to offer some unique value against others competitor. The
purpose of generic strategy is to improve and maintain the competitive performance.
There are two general types of competitive advantages: cost leadership and
differentiation. Combining with the scope that a firm pursue to achieve lead to three
generic competitive strategies: cost leadership and differentiation and focus strategy.
8
Figure 4: Porter’s competitive strategy

Cost Leadership Strategy
In Cost leadership strategy means as the firms set up the strategy to make their
products or service have the lowest cost against others producer in its industry. The
company can minimize the production cost from efficient managing the cost of materials,
labor in order to minimize the price to customer, but the profits do not go down. The cost
leadership may be achieved for those firms that have the large scale of production. In
order to achieve this economic of scale the company needs to be account for the large
proportion in the market share. A cost leadership can create a competitive advantage by
reducing the pressure of competitions, minimizing the new entrant into the industry and
increase the market share

Differentiation Strategy
Differentiation strategy means that the company can create the advanced value to
customer by supplying those products or services that are unique and superior against
9
others competitors and satisfy the demand of customers. To be successful in different
strategy, the companies have to be in the top in successful of research and development,
the skillful and energetic development team and strong marketing to make the distinctive
feature to their products When the company successful in differentiation strategy that can
charge the premium price for its products or services so that they can increase their
profits significantly.

Focus Strategy
Focus strategy is applied for many types of company from large, medium to the
small size. In focus strategy, a company focuses on one particular segment of products.
The objective of this strategy is to serve niche customer better than others players by
concentrating on its narrow group.
A focus strategy is cost leadership focus and
differentiation focus. The purpose of focused cost leadership is to achieve the low cost
production in one specific segment to share the burden price to the customer in that
group. The aim of focused differentiation is attract buyer in niche segment with
distinctive products.
2.1.2. Step 2: Accounting analysis
Accounting analysis is used to examine whether the firm’s accounting conform to
the underlying business reality.
2.1.3. Step 3: Financial analysis
Financial analysis evaluates the company’s stability and profitability in
operational, investing and financing performance. The aim of financial analysis is to use
the historical data to evaluate the current and past performance of a firm. There are three
main type that is commonly use including percentage change analysis, common - size
analysis and ratio analysis
10
 Percentage change analysis shows how the items in financial statement change
year to year, or quarter to quarter. Percent change analysis is important to
determine the performance of company in some difference periods to examine
how a company is growing or retracting.
 Common size analysis: all of financial variable in income statement are measure
as the percentage of sales and all balance sheet items are define in the level of
total assets.
 Ratio analysis: the purpose of ratio analysis is to evaluate the effectiveness of
firm’s policies in each of these areas. The ratio analysis can compare ratios for a
firm over several year to effectiveness of a firm’s strategy over time, compare
ratio for the firm and others firms in the industry to find the relative performance
of firm within its industry, compare ratio to some absolute benchmark.

Liquidity ratios (short –term solvency)
Liquidity ratios as a group are intended to provide information about a firm’s liquidity.
The purpose of liquidity ratio to measure firm’s ability to pay off its short-term
obligation.
Current ratio =
Quick ratio =
Cash ratio =
Working capital to total assets =

Leverage ratios ( long –term solvency)
11
Leverage ratios are intended to provide indication of the firm’s long – term ability to
meet its obligation, or its financial leverage.
Liabilities to total assets =
Liabilities to equity ratio =
Equity multiplier (Financial leverage ratio) =
Times interest earned ratio =
Cash coverage ratio =

Efficiency ratios
The efficiency ratios measure how efficiency the company uses the assets and liabilities.
Inventory turnover =
Days ‘sales in inventory =
Receivables turnover =
Days ‘sales in receivable =
Payable turnover =
Days’ sales in payable =
12
Fixed asset turnover =
Total asset turnover =
Cash conversion cycle = Days ‘sales in inventory + Days’ sales in receivables - Days’
sales in payables

Profitability ratios:
Profitability ratios measure how well a firm uses its assets and manages its operations.
Profit margin =
Operating profit margin =
Return on assets (ROA) =
Return on equity =
2.1.4. Step 4: Prospective analysis
Prospective analysis which focuses on forecast a firm’s future. There are two
main techniques in prospective analysis are financial statement forecasting and valuation.

The financial projected use sale forecast as the driver. The pro forma statement is
the tool use to forecast balance sheet, income statement and cash-flow statement.

There are some valuation approaches to value are suggested
-
First of all, P/E multiple valuation method
Value of firm = Average P/E multiple in industry  EPS of firm
13
However, this method can be used when the firms is in the industry are profitable, firms
is in the industry have similar growth or those firm more likely for “mature” industries
and firms is in the industry have similar capital structure
-
Secondly, DCF (Discounted cash flow) model was introduced by Irving Fisher (
1930) and John Burr William (1938)
Where:
DCF: value of stock in period t = 0
CFn : the cash flow generated by the asset for the owner of the asset in period t
r: the discount rate
n: the number of years over which the asset will generate cash flows to investors
+ There are two approaches to value cash-flow (CF) of firm free cash flow to
equity valuation model (FCFE) and free cash flow to firm valuation model (FCFF). FCFE
is the cash flow available to the common stockholder of the company after all operating
expenses , interest, and principal payment have been paid and necessary investment in
working capital and fixed asset have been made. FCFF is the cash available to common
share holder, bondholder after all operating expenses have been paid and necessary
investment in working capital and fixed asset have been made.
FCFF= Net income (NI)
Plus: Net noncash charges (NCC)
Plus: Interest expense
Less: investment in fixed capital (FCInv)
14
Less: investment in working capital (WCInv)
[FCFF = NI + NCC + Int – FCInv – WCInv]
FCFE= Net income (NI)
Plus: Net noncash charges (NCC)
Less: investment in fixed capital (FCInv)
Less: investment in working capital ( WCInv)
Plus: net borrowing
[FCFE = NI + NCC – FCInv – WCInv + Net borrowing]
+ Under the FCFF model, the discount rate is the weighted average cost of capital
(WACC). The formula to calculate is:
Where:
Re = cost of equity
Rd = cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V=E+D
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate
15
Mention CAPM to calculate Re
2.2 Methodology
The business analysis and valuation in the case of Vietnam dairy products joint
stock company (VNM) is implement by using the available financial data and others
information that public on the company website (www.vinamilk.com.vn) and Hochiminh
stock exchange ( http://www.hsx.vn ). All of the financial statement of VNM is audited
by Pricewatercooper Vietnam limited so they are reliable data. This study use both
qualitative and quantitative method.
This research is conducted through 3 steps:
 Business strategy analysis
 Financial analysis
 Prospective analysis:
Step 1: The business strategy analysis is the qualitative approach. The industry analysis
use Porter’s five force to understand the industry that VNM operate and get the overall
picture of VNM’s position. Competitive strategy is used to find which the generic
strategy that VNM implement and how it affects the VNM financial performance.
The quantitative approach is the financial analysis and prospective analysis.
Step 2: The financial analysis is assessing the VNM’s operation by analyzing the
financial statement to see how well the VNM capture the target strategy. The percentage
change analysis and ratio analysis will be applied in this section. The percentage change
analysis show the general view on the VNM’s performance, while ratio analysis is used
to understand the VNM’s operation in detail through liquidity ratio, profitability ratio,
efficiency ratio and leverage ratio.
16
Step 3: In the prospective analysis, the above strategy analysis and financial analysis will
help to forecast the financial performance of VNM in the future. For the forecasting
process, the pro forma financial statement will be made for eight years (2013-2020). For
the valuation, the discounted cash flow (DCF) method based on free cash flow to firm is
the appropriated tool because FCFF is a measure of financial performance that expresses
the net income plus depreciation plus interest expense and subtract capital expenditure
and working capital investment and FCFF show the obligation for both stockholder as
well as bondholders whereas FCFE just consider only the obligation for stockholders.
Actually, FCFF and FCFE have the some advantage and disadvantage, but the FCFF is
suitable for company has the capital structure does not change. This model widely
accepted in Vietnam because this method reflects the value of company base on its
potential growth. The value of firm is present the intrinsic value of VNM:
Value of firm =
Where:
FCFF: Free cash flow to firm
WACC: Weighted average cost of capital

FCFF= Net income ( NI)
Plus: Net noncash charges (NCC)
Plus: Interest expense
Less: investment in fixed capital (FCInv)
Less: investment in working capital (WCInv)
[FCFF = NI + NCC + Interest expense – FCInv – WCInv]
17
Vinamilk work on food producer, so all of the expenditure and others account is related
closely to the net sale. Therefore, the growth rate of others account is measured
depending on the level of revenue.
Table 1: Forecasting technique
Financial variable
Forecasting technique
Depreciation
Percentage of company’s net PPE
Interest expense
Percentage of sales
Taxes
Corporate income tax 25%
Dividend ( div)
Dividend payout ratio
Retained earning
NI-Div
Fixed assets
Fixed asset turnover ratio
Equity
financial leverage
Cost of sale( COGS)
Percentage of forecasted sales
Selling, general, and administrative costs( Percentage of forecasted sales
SG&A)

Weight average cost of capital (WACC) is computed by the formula:
The cost of equity ( Re) is calculated from using capital asset pricing model
Re = Rf + beta ( Rm – Rf )
Rf is risk free rate: 10- year government bond
Rm - Rf: risk premium is take on Damodaran website
18
Beta is the variation of VNM’s risk and the change in VN-index through 5
year (2008-2012).
Rd: the cost of debt. I will use the interest rate which is based on the shortterm borrowing of VNM.

Terminal value: Terminal value = FCFFn * (1+gn) / (WACC – gn)
Then, we can calculate the intrinsic value of the firm’s stock.

Intrinsic value of firm’s stock =
After computing the intrinsic value of firm ‘stock, it will be used to compare with the
market value to realize whether the company under or over value.
19
CHAPTER III
INDUSTRY, STRATEGY AND COMPANY ANALYSIS
3.1 Industry analysis
3.1.1. World dairy industry
Table 2: World milk production
2010
2011
2012e
Change over
2011 over 2010
Million tones
Total milk production
722.9
737.9
759.6
Change over
2012eover 2011
%
2.07
3
Sources: FAO, food outlook
The global milk production increase 3% from 2011 to 2012 higher than previous period
which is the result of the rise significantly of milk production in Asia, Oceania, and South
America. The growth of those quantities in Asia means that the developing countries
invested more in herd cow farm whereby, we can realize that those countries in Asia
perceive the important of milk and milk products.
20
Figure 5: Milk production in major exporter-change from prior year
(Sources: Global dairy market outlook, U.S. Dairy Export Council)
In recent month, the milk production of 5 biggest exporters is not good. Australia, one of
the countries has the biggest amount of milk production in the world, some recent month,
the volume of milk output decreased compare with previous year, and it is forecasted that
the output will drop nearly 3% in 2013. New Zealand is currently under influence of
drought in Feb 2013, so it considerably impact on milk production, with the yield output
in March reduce 15 to 20% and it is assumed that in 2013 the total output in New Zealand
drop 0.3%. The milk production in Argentina decreased from the august 2012 to the
January 2013 compare to prior year, but in February 2012 it is nearly equal to that
volume in Feb 2013, it is hope that the milk output in Argentina will be better. EU-27 has
experience a bad climate, so the milk production will be badly affected. United States is
the only country which has the increase in total milk volume, so it hoped that the output
in USA will move the same this trend.
21
Table 3: Milk consumption per capita
Dairy consumption per
capita
World (kg/year)
Developed(kg/year)
Developing(kg/year)
Sources: FAO, dairy outlook
2010
2011
2012f
Change: 2012 over 2011
104.6
234.1
69.4
105.6
234.9
70.8
107.5
238.1
72.7
1.8
1.4
2.8
The demand per capita for milk products go up, especially developing countries. Asia
will continue to be import a large proportion of dairy products, with account more than
50% of world imports in which China is the big importer with the estimated imports of
whole milk and skimmed milk powder climb 12% and 18%, respectively in 2013.
Figure 6: Global dairy price index
(Sources: FAO, dairy outlook)
 The demand for milk continues to grow, so the amount milk imports increased
considerably. With the growth marginally in milk output that lead to the amount of export
is not adapts the need of import. Therefore the dairy price increases. This increase affect
directly to the importer in general and the customer in specific
22
3.1.2 Domestic analysis
 Vietnam real GDP growth and GDP per capita
The real GDP growth in Vietnam fluctuates every year. In 2007 the GDP growth
increased 8.48% and then the growth rates reduced to 6.3% and 5.3% in 2008 and 2009,
respectively. This reduction is the result of global financial crisis and Vietnam was
affected as well. In 2010, the Vietnam’s economy is recovered by many policies that
government impose to overcome this situation, so the real GDP level is 6.8%. In 2012 the
GDP growth decreases to 5% because of economic recession. In 2013, many economists
expect that the GDP growth will a little bit higher than 2012 and the year later, the
Growth in GDP will increase. Additionally, the GDP per capita increase year by year, in
2012 the GDP per capita is $1552.6 that is half as many again as this number in 2008.
This is the good signal for the growth in dairy consumption.
Table 4: Vietnam real GDP growth and GDP per capita
Real GDP growth
(% per year)
GDP per capita
(US$)
2008
2009
2010
2011
2012
2013f
2014f
2015f
2016f
6.3
5.3
6.8
6.0
5.0
5.5
6.9
7.1
6.6
1052
1064
1156
1392
1553
1702
1865
2026
2198
Sources: Ernst and young
 Vietnam CPI average y-o-y
CPI growth in Vietnam fluctuates from 2008 up to now. In 2008 CPI growth increased
dramatically, with the average ratio 23.1% due to the economic regression and high
inflation. After that, thanks to government policies to reduce the inflation, the ratio is
dropped to 7% in later year and then continued to increase significantly with the rate
18.7% in 2011. In 2011, the price of domestic material increase quite high, but in 2012
23
this ratio is restrained at 9.1% on average. Vietnam is the developing country, so in
comparison with the average CPI of East Asia and Pacific, the CPI in Vietnam has
fluctuated with the growth rate normally higher. In the later year, when the economic in
Vietnam is more stable and the government enforces some solution to curb inflation, it is
predicted that CPI growth will decrease and move as the same way with the average of
Asia and pacific region. Specifically, that is the good signal for the dairy enterprise.
Figure 7: Vietnam and East Asia and Pacific CPI average
3.1.3 Porter’s 5 forces analysis:

Threat of new entrant:
The raw milk material in Vietnam currently is just 25% self-sufficient, while in Thailand,
the ratio is 75%. The Ministry of Agriculture and Rural Development try to develop dairy
industry by many aspects such as the increase in dairy cow, the tax reduction on dairy
imported products. As can be seen, the breeding activities of dairy cattle increase
considerably year by year from 104,120 head in 2005 to 132,000 head in 2010 and are
forecasted to go up 12.7% per annum during 2010 and 2015 and 10.76% from 2015 to
2020 that the number will go up to 400 thousand heads in 2020.
Table 5: The number of dairy cattle and domestic consumption per capita
24
Dairy cattle
(head)
Per capita
consumption
(liter)
2005
2008
2009
2010
2015f
2020f
CAGR
(10-15)
CAGR
(15-20)
104,120
107,983
115,518
132,000
240,000
400,000
12.70%
10.76%
12.22
14.81
-
15
21
27
-
-
Sources: National Institute of Animal Husbandry
Vietnam is an agriculture country, but they still import heavily on dairy products with
account for 70 % to 75% of total demands. However, the quota of milk and milk products
imported to Vietnam increased with the decreasing rate year by year. In 2010 the amount
of those imported increase 37.3% compare with previous year. In 2011, the portion on
imported amount went up with 18, 9% lower than the ratio in 2010. In 2012, the imported
amount is almost the same in 2011 but the demand for them increases significantly. It
implied that Vietnam is more self-control in raw milk materials.
Table 6: Vietnamese imports of milk and milk products
(thousand USD)
2009
2010
2011
2012
Milk imported products
515,773
708,289
842,164
840,736
37.3%
18.9%
(0.2%)
Percentage change
Sources: General directorate of Vietnam Customs
Additionally, According to the Vietnam agribusiness report in 2013, the Vietnam cow
milk production increase dramatically. The domestic milk production now just meet 25%
of customer ‘need, but it increased year by year due to the expanding the dairy herd,
investing in dairy farm environment, the cow breed and the cow food to get the high
value output. We can see that the domestic milk production rose 19% from 2009 to 2012.
And in2017 that number is forecasted to grow to 416 thousand tones around 25.7 %
compare to 2012.
25
Table 7: Cow milk production
Year
2009
2010
2011 2012 2013f 2014f 2015f 2016f 2017f
Fluid milk
278.2 306.7
production
320
331
343
360
378
398
416
(thousand tones)
Sources: Agribusiness report, BMI
It is concluded that the cow farm in Vietnam has developed and the raw fluid milk
production went up every year. Therefore, it means that Vietnam is more and more
control the raw milk input for the dairy production.
The milk consumption per capital in Vietnam (15.7kg-2011) is far-away compare to
those in Asia Pacific (97kg-2011) and this number is predicted to climb expressively. For
those reasons, this is the good signal for impulse those enterprises working in this
business and farmer to raise cow and then contributes considerably to the Vietnam GDP.
Table 8: Vietnam milk consumption per capita
Year
Milk consumption
per capita (liter)
2000
2005
2010
2015
2020
2025
8.09
12.22
15
21
27
34
Sources: National Institute of Animal Husbandry
Along with the development of country, the population’s distribution in Vietnam has
change in recent year. The proportion of people lives in urban area increase meanwhile
the rural residences reduce. With the rise in urbanization, the awareness of people about
their health improved, so they comprehend the importance of the dairy product’s value.
This one contributes considerably to the high in milk’s consumption.
26
Table 9: Vietnam population
Urban
population (%)
Rural
population (%)
2000
2005
2010
2012
2015f
2020f
24.3
26.4
28.7
29.7
31.2
33.9
75.7
73.6
71.3
70.3
68.8
66.1
Total
population
77,635.40 83,106.30 87,848.40 89,730.30 92,442.60
96,355.10
( thousand)
Sources: Agribusiness Report - BMI
Although the Vietnam ministry of industry and trade reported that the growth rate of raw
milk imported decreased, the level for imported raw milk still high lead to the price go
up, the milk consumption, especially powder milk and liquid milk consumption still
perform well because government and enterprise have many program to enhance the
awareness of people about the benefit of milk. To do that dairy company had activities
and campaign to encourage people use milk products such as 6 million glasses of milk for
poor children of Vinamilk…
 The Vietnam dairy industry is promising with many opportunities. With the
growth in dairy industry capacity, the urbanization, the increasing in income level
so that the awareness about the useful of dairy products of people goes up.
Therefore, dairy is potential market in Vietnam that can attract more enterprise to
enter. However, the cost for production is quite high, especially the technology to
produce UTH/ Pasteurized milk and the dryer for making powder milk.
Additional, the cost for building the farm is considerable and the quality and
quantity of milk material depend much on the land and the weather. Those reason
will deter new entrant get into the business
27
Thus, the threat of new entrant is significant

Bargaining Power of Suppliers:
The resources of material for agribusiness are from products of farm produce.
Specifically, products of dairy industry depend on raising cow milk. Vietnam is
agricultural country, but Vietnam still import more than 70% raw powder milk and
about 84% raw fresh milk from prestige country such as: New Zealand, USA,
Australia, Netherlands, Poland, demark, France…so milk industry must face the risk
of price change and exchange rate exposure. Particularly, the world milk prices go up
and this trend is predicted continuously. Vietnam continues to increase the number of
cow milks so that it is forecasted that the milk production in 2017 will climb 25.7%
compare to 2012. And the government imposes the slow tariff for milk import so it
can be reduce the burden for dairy enterprise. Among those domestic dairy company,
Vinamilk is the company ensures that all raw fresh milk is supplied from domestic
and the company tries to expand the area raising cow cattle but VNM still import
100% raw powder milk.
 Therefore the risk for power of supplier is considerable.

Rivalry among existing firms:
Dairy market is high competition in both domestic and foreign firm. Vinamilk is the
leader in dairy industry which has many kinds of products and to be continuing invests in
cow herd, technologies and product’s quality to maintain this position. Friesland
Campina is the big competitor of Vinamilk in many products also tries to enhance the
quantity and quality of their products. TH Milk is the company that occupies the big
portion in fresh milk segment. TH milk estimated that they will invest totally $ 1.2 billion
in dairy industry. Bavimilk, Mocchau milk, Hanoimilk, Longthanh milk and so on will
continue to assert their position in dairy market. The incentive tariff for dairy products is
the chance for many foreign company import dairy into Vietnam. Typically, the powder
28
milk segment the foreign company occupy the big proportion of market share in which 4
companies Abbott ( 24%), Dutch lady( 14%), nestle (9%), Mead Johnson ( 14%), so
those enterprise can sway the price of powder milk.
Therefore, the competition between existing dairy firms is high

Bargaining Power of Buyers:
The domestic material resources will adapt 20 -25 % the domestic demand so that the
Vietnam is still potential market for dairy with the consumption increase considerably.
Additionally, Vinamilk is an enterprise that has the good distribution including 250
executive distributors and 200000 retailers and provides their products through all
supermarkets in domestic, so the approach to customer is easier than others peer.
However, there are many dairy companies in the market, and the price is more
competitive. The customer will move to use the others products if the price of the
company set high.
Therefore the risk of buyer is high

Threat of Substitute products:
In the market currently, there are many products such as cereal powder, soymilk, energy
drink, functional food, those products is add many ingredient and vitamin that help
people enhance the health, but they cannot substitute completely for milk because milk
contain all the nutrient that is good and safe for heath that the other ones cannot replace
it.
Therefore, this risk of substitute products is moderate.
3.2. Company analysis:
3.2.1. Company overview
29
Vinamilk was found in 1976 with name Southern Coffee-Dairy Company. In 1992, the
company was changed name to Vietnam dairy Company and was managed by the
Ministry of light Industry. In 2003, the company officially changed from state-own
company to Joint Stock Company and has assigned the new name Vietnam dairy
products joint stock company. Currently, the share capital structure comprises 45% share
from state own, 49% from foreign shareholder and 6% from local shareholder. Vinamilk
was listed on Hochiminh City stock exchange January on 19th 2006 with code VNM.
Vinamilk and their subsidiary work in many sectors:

Manufacturing and supply milk, processed milk and others beverage and
processed dairy food.

Raising cow milk, supply breeding cattle and breeding technology and facilities.

Producing and supply plastic products and packages.

Health care service

Real estate business

Supply logistics service.
Among those activities that Vinamilk work on, there are some main business areas such
as: manufacture and supply fresh milk, processed milk and others dairy products; raising
and breeding dairy cow.
Vinamilk is the biggest dairy company in Vietnam make up of 39% domestic market
share, the second giant is Dutch Lady that account for 25%. The remains are others
domestic company such as Mocchaumilk, IDP, Hanoimilk, so on and foreign company:
Abbott, Nestle, Mead Johnson and so on. Vinamilk ensure to give the consumer the fresh
product with high value.
30
Figure 8: Vietnam dairy market share
(Sources: BMI)
Vinamilk has provided more than 200 products in 5 main segments:

Liquid milk: including UTH long-life milk and Pasteurized milk. Vinamilk has
the biggest proportion in liquid milk with 40% market share.
Figure 9: Liquid milk production
(Source: Agribusiness report BMI)
31

Powder milk: this segment is quite belong to foreign company, just for 4 foreign
company Abbott, Friesland, Mead Johnson, Nestle account for 61% of market
share. VNM occupy 19% for this segment. However, the tendency of people
nowadays moves to choose the Vietnam’s product is the good signal for
Vinamilk.
Figure 10: Powder milk production
(Source: Agribusiness report BMI)

The yogurt segment: drinking yogurt and spoon able yogurt. VNM has more than
73% market share including 95% market share on spoon able yogurt.

Condensed milk: Condense milk is strength area of VNM with took up 85%
market share and no other companies can face with Vinamilk. However, the
consumption for this segment is more and more decrease every year.

Others products: Vinamilk has some products such as soya milk with the brand
name Gold Soy and others beverage such as fruit juice, pure water and so on. This
is contributed the least amount to total revenue.
32
Vinamilk’s products that are supply in domestic constitute more than 80% of total
revenue and those selling in foreign countries cover the remaining proportion. Vinamilk
focus exports their products in some countries of Mideast and Southeast Asia.
With the strongly invest in distribution channel, up to now, Vinamilk has 250 executive
distributors and 200000 retailer in all Vietnam and supplied directly their products to the
super market throughout the country.
Currently, Vinamilk has 12 factories in domestic in which 10 factories are operating
10 factories are operating:
o Truong Tho Dairy factory
o Thong Nhat Dairy factory
o Dielac Dairy Factory
o Binh Dinh Dairy Factory
o Nghe An Dairy Factory
o Sai Gon Dairy Factory
o Can Tho Dairy Factory
o Tien Son Dairy Factory
o Vietnam Beverage Factory
o Da Nang Dairy Factory
2 factories will be operating in the second quarter 2013:
o Vietnam Dairy Factory
o Vietnam Milk Powder Factory.
Besides, Vinamilk has some subsidiaries and associate including:
o Vietnam Dairy Cow One Member Limited Company with 100% share
capital.
33
o Lam Son Dairy One Member Limited Company with 100% share capital
o International Real Estate One Member Limited Company with 100% share
capital
o Asia Saigon Food Ingredients Joint Stock Company with 15% share
capital
o Miraka Limited Company with 19.3% share capital.
3.2.2. SWOT analysis
 Strength

Vietnam dairy products joint stock Company, named as Vinamilk, is the leading
enterprise in Vietnam dairy industry. Vinamilk is the trustworthy brand mane in
domestic market which account for about 39% of Vietnam dairy market share.
VNM has. Up to now, Vinamilk has 12 factories in which there are two biggest
factories in Asia and all Vinamilk’s factory is equipped high-technology with
international criteria in manufacturing process Therefore, with the large capacity
and advanced technologies Vinamilk can take the advantage both in high volume
and quality’s products against others competitor.

VNM has wide distribution channel with 250 distributor, 200,000 retailers and
supply their products to all over supermarket throughout Vietnam, so Vinamilk
products can be easy to approach to the users

VNM has good strategy to control the expenditure to share the price’s burden to
the consumer and also get more profit generate from sales.

VNM invest highly in products’ differentiation in both fresh and processed dairy
products, so it creates the variable choices to consumers. Recently, Vinamilk add
more value to their products such as probeauty yogurt with supplemental
collagen, soya milk with high fiber, Dielac formula powder milk and so on to
make products satisfy the needed of all age group.
 Weak:
34

The imported dairy material constituted more than 70% so it is affected by the
changing in price of global dairy products.

The strict competition from other domestic and foreign brand name in some main
segment such as the high competition with TH Milk, Dutch Lady in liquid Milk,
the strongly compete with Mead Johnson, Abbott, Nestle and Dutch Lady in
Powder milk.

The proportion of people lives in rural area high so it is affected to milk
consumption.
 Opportunity:

Domestic dairy yield just adapt 25% domestic’s demand, so that is the potential
market for Vinamilk to expanding their production process.

VNM is the trusted Vietnam brand name in high-quality, so it contribute to build
the loyalty of customer against others competitor.

To enter 2 new factories into operation in which the Vietnam dairy factory in
Binh Duong province has the capacity equal the sum of 9 capacity of Vinamilk
that make Vinamilk meet the increasing demand of Vietnam market.

Expanding the capacity by investing in Mikara Company in New Zealand to help
Vinamilk deal with the shortage of imported milk because the poor weather and
the high increasing on demand of dairy products that lead the global milk
production recently cannot satisfy the demand.

Significant investment on dairy cattle herd is the opportunities for Vinamilk to be
able to self-sufficient in raw fresh milk.

Strength in Vietnamese market open opportunity for Vinamilk success in
exporting to others emerging South East Asia market.
 Threat:

The exchange rate exposure is the factor affected by the imported materials.
35

The Vietnam’s infrastructure is low that is a bit hard for widen distribution,
especially the highland region to keep the high-value products.
3.2.3. Vinamilk’s strategy analysis
In order to maintain the leader in dairy industry, Vinamilk impose strategy focus on
operational and distribution management, cost leadership, and invest in R&D to improve
the quality and create the diverse products rage.
 In operational and distribution management:
 Operational management
The core strategy of Vinamilk is to bring out the outstanding high quality products to
customer. In order to implement this target, Vinamilk need to have the advanced process
from the inputs to outputs.
 The material resources are assurance.
Vianmilk control closely the sources of input to create the raw material with
satisfies the production demand.
36
 For the foreign supplier, Vinamilk has been imported the high quality
input (raw powder milk) from many famous countries in dairy segment
such as American, New Zealand, and other European countries, so the
quality standard for those milk are guarantee.
 For domestic supplier:
Vinamilk focus on expanding their own breeding farm, enhancing the number
of cow milk per herd cattle. To do that, Vinamilk has invested strongly on raising
facilities with the automatic high - standard equipment. Additionally, Vinamilk select
the breeding cow with high yield and good quality milk. Up to now, Vinamilk has 5
cows farm with 8200 cow milk in which there are more than 4000 dairy cattle of high
–output breed cow HF which was certificated by Association from Australian and
New Zealand. Vinamilk is continuing building 4 more farms to increase the number
of cow milk to 28,000 in 2016. Vinamilk hope that they can own the sources of raw
fresh milk with high criteria in near future.
Besides, Vinamilk is in close association with the dairy cattle producing
household by supply the high quality breeding cow, training the technique for
breeding and supporting the high quality equipment to keep the milk’s quality
standard. Moreover, Vinamilk commit the quantity and the price of raw milk to
satisfy farmers.
 The effectiveness in research and development:
Research and development is the extremely importance activities for food production,
especially dairy products that require the absolutely accurate criteria. Vinamilk has a
good research and development department with highly qualified staffs and the
research methodological and technical is upgrade to meet the international standard.
37
Besides, Vinamilk coordinate closely with the national institution of nutrition and
other nutrient and medical centers like DMS, ARLA, and so on to perfectly complete
the standard quality for milk’s products. The research and development is also the
place to examine the characteristic of raw material to build up suitable standard for
reserve and using them. For the existing products, this department always checks
again the quality to enhance the value of those products. Moreover, with the trait
point of raw material, Vinamilk investigate the new ingredient along with the
tendency of customer to create the new products that satisfy the demand of users and
exploit maximize the value of dairy products.
 The Effectiveness on production process:
In order to be good at production, Vinamilk has invested strongly on their plants
and equipment to create modern production lines to improve the quality of products and
maintain the leader in Vietnam dairy industry. As can be seen clearly, Vinamilk has 10
operational factories and 2 super factories under construction in Binh Duong province
which equipped high technology imported from Europe with global criteria and will go to
operate in the second quarter of 2013. The first super factory, Dielac 2 powder milk
factory which has built in Vietnam - Singapore Industrial zone was equipped with 2 dryer
that has the biggest capacity in Asia. This factory will produce 54,000 tons powder milk
per year. The second super factory is Mega factory in My Phuoc Industrial zone with the
special point is that their manufacturing process is operate automatically with 19 robots
so that Vinamilk can save expenditure, labor cost and produces the product with high
preciseness. The Mega factory has capacity 400 million liter per year in the first phase
and equal the total capacity of 9 Vinamilk’s factories, in the second phase the capacity is
expected double, at 800 million liter. Not only these 2 big factories had the high
technology equipment but also all factories of Vinamilk is operate with high - technology
machine which is imported from the famous company such as Tetra Part and GEA group.
38
Additionally, with close manufacturing process, Vinamilk can maintain the safety
products with high quality standard. All Vinamilk’s products are strictly examined the
safety and hygiene with the criteria of HACCP and ISO standard. Besides, the packaging
for the products is very important, Vinamilk imported the wrapping from the global
leading corporation of this segment to ensure that it can keep the quality of milk and not
contain the toxic that affect Vinamilk’s products.
After finish produce products,
Vinamilk had the process in inspection of quality before putting their products into
market.
 Distribution management:
According to Kantar World panel report the Vietnam dairy industry has the fast growing
in Fast Moving Consumer Goods with the high value change, especially rural area with
the high growth rate 31% in 2011 and 26% in 2012. Therefore, the exploitation in rural
area is quite important to catch the value gain from the increasing trends to healthy
products in this area. Thus, wide development in distribution channel throughout the
country is the effective solution to gain the market share.
Figure 11: Growth rate dairy consumption in domestic Urban and Rural
(Sources: Kantar World panel – FMCG)
39
Vinamilk built the strong distribution channel to widen the approach of their products to
the consumers. Currently, Vinamilk supply their products to total supermarkets through
the country. Additionally, Vinamilk also has 250 exclusive distribution agencies all over
the country. Up to now, Vinamilk set up 200,000 retailers throughout the country, so
Vinamilk have strong distribution channel to assess both urban and rural residence. With
the development on distribution channel, Vinamilk will keep the quality of products to
bring the healthy one to the user and can expand their products to the rural area. In 2012,
Vinamilk conduct to building the sale online system by associating with Viettel
Company. By doing that, the product’s information is more instant to approach
customers. It is anticipated that this system will help Vinamilk improve the operational
management on retailer and distributor and can control strictly sales volume.
 Cost leadership:
VNM import approximately 70 to 75% of raw milk materials, mainly powder milk
(whole milk and skim milk). Hence, they must face the risk of global milk price
fluctuation. Especially, in recent time, the whole milk price and skim milk price increase
due to the drought in New Zealand in February 2013 and others major dairy exporter
experience the poor climate and their dairy herd decreased in productivity. However, the
demand for dairy product more and more increase especially in developing country that
leads to the shortage of milk, so the price for raw milk increase significantly. Fortunately,
in 2010, Miraka factory is built in New Zealand with 19.2 % share capital of Vinamilk,
so Vinamilk can sustain the amount of imported material to prevent the insufficiency of
raw material and their changing price.
40
Figure 12: Global dairy price trend
(Source: USDA’s Dairy Market News.)
Moreover, approximately half of domestic raw fresh milk provide for Vianmilk,
so Vinamilk may control on the price of domestic fresh milk. Additionally, the amount of
fresh milk output that VNM can self-supply increase more and more, from 6% of total
raw fresh milk in 2010 to the level 12% in 2012. Currently, VNM has 5 cows farm in
Lam Dong, Tuyen Quang, Nghe An, Thanh Hoa, Binh Dinh with 8200 cow milk and
with the expectation on self-control of price, VNM continue to build 4 new cows farm in
Thanh Hoa, Tay Ninh, Ha Tinh and planed in 2016, they will have 28,000 cow milk, so
with the big number of cow milk Vinamilk hope to control all their fresh material in near
future. Thus, we can see that VNM invest strongly on the material resources to diminish
the burden on fluctuation of raw material that can help the Vinamilk production process
is more stable and lead to reduce the cost. By reducing the cost of goods sold and applies
the economics of scale by producing with the large volume that leads the price of
Vinamilk’s products cheaper than to others competitor. Additionally, some products of
Vinamilk has attended to stabilize price such as powder milk formula…, so it is the way
that company can shares the price pressure to customer.
41
Table 10: Vinamilk breeding activities production
2010
2011
2012
120.23
118.51
141.54
Total output of Vinamilk’s herd (million liter)
8.33
12.72
20.05
Percentage VNM supply for their own (%)
6%
10%
12%
Purchasing fresh milk from household livestock
(million liter)
Sources: Vinamilk Sustainable development Report
Vinamilk try to decrease the expense of energy resources comsuption. As can be
observed on the table, the amount of energy sources using for manufacturing is declined
every year. Besides, Vinamilk is replacing the using of FO oil to clean enegy such as
Biomass and CNG to protect the environment and save cost as well. All in all, it is seen
that vinamilk has been using the enegy more effectiveness, so that is the way VInamilk
can sve cost for production to have the good price for customers.
Table 11: Vinamilk Average total energy consumption for producing products
2010
2011
2012
Oil ( kg)
23.14
16.3
13.49
Gas(kg)
0.84
0.43
0.37
Electricity(kwh)
120.42
118.06
113.18
Biomass(tons of stream)
0.01
0.04
CNG ( mm BTU)
0.2
0.21
Sources: Vinamilk
42
 Increasing the products diversification and quality:
The demand for products of people is higher with every passing day. They not
only need the products that give them energy and necessary nutrients but also are good
for their health and beauty. Therefore, Vinamilk has attached special importance to
products research and development so that can adapt the variety of customer, especially
products differentiation. Vinamilk has many types of products for all ages such as baby,
children, adult and elder people with famous brand name. In 2010, VNM brought the
pasteurized milk to the market. That one had succeed for some brand name like Long
Thanh, Moc Chau,…, But the attendance of Vinamilk in this segment make customer
ensure product’s quality, safety and hygiene that is promising a potential market for
Vinamilk. 2012 is the successful year of Vinamilk, they brought out many new products
to the market in which goldsoy milk, probeauty yogurt, Dielac optimum formula is the
advanced ones. For soygold milk that is the products raise the concern of customer
recently because it make from vegetation so it contain more fiber, low fat that is better
for health for both children and adult. For probeauty yogurt, understanding the need of
people in general and women in specific, Vinamilk produce the kind of yogurt with
contain collagen to protect their skin. The Dielac formula powder milk contains the
substances that support the digestion and brain of children. With variety products
launched to the market combine with the high quality on them, VNM more and more
control domestic market and become the trusted brand name for customers.
43
CHAPTER IV
FIANCIAL STATEMENT ANALYSIS
4.1. Income statement analysis
4.1.1. Percentage change income statement analysis
Percentage analysis which is computed by taking the change in amount of money at the
end of year and beginning of this year divide to the money at the beginning of year is the
horizontal analysis. It presents the change of all items in income statement year to year
from 2007 to 2012 to see the vinamilk’s performance.
 Net revenue
2007
2008
2009
2010
2011
2012
6,537,964
8,208,982
10,613,771
15,752,866
21,627,429
26,561,574
25.56
29.29
48.42
37.29
22.81
CAGR
(2008-2012)
Net sales
(million
34.12%
VND)
% change in
Net sales
The net revenue of Vinamilk incresaed continuously with the significant compound
annual growth rate 34.12% during 2008 and 2012 due to the increase in sale volume, the
high in value added-products, the increase in price and the enhance of distribution
channel. Especially in 2008 and 2009, although the economic is unstable and the
melanine scandal that effect significantly on dairy industry because Vietnam also
imported the powder raw milk from China, so that lead the customers care a lot about
44
milk products, they limited the amount of milk consumption or move to use the trusted
brand name. Fortunately, Vinamilk’s revenue still increased in this periods because of
Vinamilk are trusted brand name and people move to chose them due to the safety for
their health . In 2010, Vinamilk had a surge of 48.42% compare to previous year due to
the price of Vinamilk products went up 6% and the productivity increase 30% compare
to 2009, among them liquid milk, powder milk, yogurt and condense milk went up 53%,
59% ,58% and 30% in respectively. Therefore, the consumption of condense milk
reduced to give the market for others fresh and healthy ones. In 2011 this rate reduced a
bit, but it is still high with the ratio of 37.3% increase in revenue and in this year,
Vinamilk got the landmark with 1 billion dollar in net sale. Currently, Vinamilk is at the
53th of the biggest dairy enterprise in the world. With the tendency growth like this,
Vinamilk is hoped to get the target 3 billion dollar in 2017 and be one of the 50 biggest
dairy companies in the globe.
The revenue of Vinamilk is divided into 2 geological segment: domestic and export.
Although, the domestic is account for the large majority of Vinamilk total sales, the
export’ revenue still covered about 10% to 15% each year. In export field, Vinamilk’s
products has penetrated to more than 15 countries around the world in which there are
some big countries such as: Philippine, Australia, Canada, Russia, Korea,…In 2008, the
net revenue from export accounted for 15% of total sale. The proportion of export in sale
revenue reduced to 11% in 2009 and 2010. After that, in 2011and 2012, the ratio sale for
export went up to 13% and 14%, respectively. This trend is expected to go up in the
future and Vinamilk commit to enhance the quality to satify the demand of both domestic
and export.
45
Figure 13: Vinamilk’s net sale in domestic and export
(Sources: Vinamilk)
All in all, it can be concluded that the revenue of Vinamilk increased with the high
growth rate, among them the sales of liquid milk, powder milk and yogurt went up
significantly. Therefore, Vinamilk is high centration to develop in those segment by
development in material resources in both domestic and foreign country by expanding the
herd and invested in Miraka dairy company in New Zealand, increase in production
capacity, widen the distribution channel, exploit the rural market, build the customer
loyalty through PR campaign and enhanced products quality, it is hope that Vinamilk will
maintain the high growth rate in the future.
 Cost of good sold
2007
2008
2009
2010
2011
2012
4,836,283
5,610,969
6,735,062
10,579,208
15,039,305
17,484,830
16.02
20.03
57.08
42.16
16.26
Cost of goods
sold (million
VND)
% change in
Cost of goods
sold (%)
46
The growth rate in cost of good sold of Vinamilk fluctuated during 2008 to 2012.
Although in 2008 the CPI surged the high growth rate 23.1%, thanks to the significant
decreased in the cost of material imported from foreign countries, the cost of good sold
increased 16.02% meanwhile the revenue went up 25.56% because the amount of
imported raw material covered nearly 70 to 75% of Vinamilk’ material needed. In 2009,
the ratio in Vietnam’s CPI plummeted, but the global dairy price went up that lead to the
cost of good sold increase 20.3% compare to prior year, this ratio was still less than the
growth rate in sale 29.9% while the price of their products just rose 6%, so it implied that
VNM saved cost of goods sold. In 2010, dued to the increase in sales at 48.42%, the cost
of good sold went up 57.08%. This ratio was higher than the growth rate in revenue
because both the fluctuation in global dairy price in 2010, the avearge CPI growth in
Vietnam went up with 7% in 2009 to 8.9% in 2010 and in this year Vinamilk increased
the price of purchaisng material for household breeding livestock by 750VND per
kilogram. In 2011, the rate in cost of good sold was still higer than the ratio in sales dued
to the increase in price of raw material imported from foreign country and the surged in
Vietnam CPI growth , at 18.7% and in 2011 Vinamilk had 5 times to increase the price
purchasing for household livestock because the foodstuff for cattle went up significantly.
In 2012,
according to the government policy, the average CPI growth went down
significantly, at 9.1% and the cost of those imported material reduced along with the
development of Vinamilk in breeding activities to more control the price of fresh milk
products and invest new factory in New Zealand to stabilize the powder raw milk, the
growth rate in cost of good sold decreased, with 16.26 % compare to prior year and
smaller than the growth rate in revenue. That is the good signal to justyfy that VNM try
to controll the cost of inputs and the evident that Vinamilk is still in control of them
47
Figure 14: Vietnam core CPI
(Sources: HSBC)
 Gross margin
Gross margin
(million VND)
% change in Gross
margin (%)
2007
2008
2009
2010
2011
2012
1,701,681
2,598,013
3,878,709
5,173,658
6,588,124
9,076,744
52.67
49.30
33.39
27.34
37.77
The gross profit of Vinamilk increased throughout the year from 2008 to 2012 with
changing growth rate. The growth rate of gross margin in 2008 and 2009 was 52.67% and
49.3%, respectively. In 2010 and 2011, by effecting the high growth rate in cost of good
sold, the gross margin experienced the lower growth rate, with the rate 33.39% and
27.34%, respectively, that mean that the growth in gross margin is strongly affect by the
growth in cost of good sold. As can be observeb, in 2012 the gross margin growth
37.77% compare with the rate 27.34% in 2011 that is the result of reducing the growth
rate in cost of goods sold from 42.16% in 2011 to 16.26% in 2012. Therefore, with the
strategy is to reduce of cost production, Vinamilk will get the increase in the growth of
gross margin.
48

Financial income
Financial income
(million VND)
% change in Financial
income
Financial income/ net
2007
2008
2009
2010
2011
2012
257,865
264,810
439,936
448,530
680,232
475,239
2.7%
66.1%
2.0%
51.7%
-30.1%
0.19
0.16
0.11
0.14
0.07
profit before tax
Financial income contributes partly to the profit of almost company. Vinamilk is the
enterprise that received a lot of money from financial investment that contribute more
than 10% in net profit before tax of Vinamilk , except 2012 because the interst rate
decrease and economic downturn..In 2008, dued to the drop of security market, VNM
financial income just went up 2.7% compare to 2007. In 2009, financial income of
Vinamilk gained 66.1% compare to previous year because the gain 139,577 million VND
from liquidation all share capital of SABmiller Beer joint venture. Vinamilk sold the
share on SAB Miller due to the big loss 74 billions VND incured from this project, this is
the right decision because the core business of Vinamilk is trading milk which is the
healthy products contradict to beer. In 2011, with the high in deposit rate, Vinamilk got
large amount from interest income nearly 366.52 billions VND, so the income from
fianncial investment grew considerably to 51.7% compare to those 2010. In 2012,
affected by economic recession, almost the income from financing activities was lower
than 2011, so financial income experience the negative growth rate -30.1%. The large
amount of financial income come from foreign exchange gain and interest income from
deposit. From 2013, with the interest rate is expected to reduce continuously, and the
exchange rate is fluctuation, so the Financial income is predicted lower

Financial Expenditures and selling, genral and administrative expenses
49
million VND
2007
2008
2009
2010
2011
2012
Financial expenses
25,862
197,621
184,828
153,199
246,430
51,171
11667
26,971
6,655
6,172
13,933
3,115
1068555
1350112
1538418
1826333
2271346
2870986
2008
2009
2010
2011
2012
% change in Financial expenses
664.1%
-6.5%
-17.1%
60.9%
-79.2%
% change in interest expense
131.2%
-75.3%
-7.3%
125.7%
-77.6%
% change in S, G and A expenses
26.3%
13.9%
18.7%
24.4%
26.4%
in which: interest
expense
S, G and A expenses
The financial expenses for VNM reduced each year by decreasing the finance on debt,
except 2011 because in this year VNM had big loss from foreign exhange diffrences.
S,G and A expenses stand for selling expense and administrative and general expense. In
General, the SGand A expense went up slightly with increased rate every year. That was
the result of the rise in advertising expenses, the commission for agencies, the
distribution channel, the salaries and so on. However, this increase was less than the
increase of net sales, so as can be seen clearly, VNM tried to save the cost for all
activities. In the future, the selling, general and administrative expense is predicted to go
up because the expenditure for PR activities is assumed to go up and building the brand
image is the way to maintain the market share and customers.

Profit/(loss) from other activities
Profit/(loss) from other
activities( mil VND)
% change in Profit/(loss) from
other activities
2007
2008
2009
2010
2011
2012
120,790
130,173
135,959
608,786
237,226
287,317
7.77%
4.44%
347.77%
-61.03%
21.12%
50
As can be clearly observed, the percentage change of profit from other activities in 2010
is extremely high, at 347.77% compare to prior year, it is the result of selling the Sai Gon
Coffee factory to Trung Nguyen company with the total money about 700 billions VND.
and the profit after deduct book value is nearly 335 billions VND. Vinamilk sold this
coffe factory because due to the unsuccess in this segemnt and Vinamilk want to focus on
the core business, dairy products production. The selling this factory would help
Vinamilk have more money to invest in the Vietnam dairy factory and Vietnam powder
milk factory which are the biggest factory in Asia with the modern technology. Thus,
because the big abnomal return in 2010, the profit from others activity in 2011
experienced the negative ratio. In 2012, this growth rate is contiuously increased to
21.12% compare to previous year. In assumption nothing others happen, so this profit
will fly up.

Profit
2007
2008
2009
2010
2011
2012
Operating profit/(loss)
865,129
1,315,090
2,595,399
3,642,656
4,750,580
6,629,825
EBIT
943,714
1,344,342
2,724,703
4,245,035
4,965,059
6,926,553
Net profit/(loss) before tax
955,381
1,371,313
2,731,358
4,251,207
4,978,992
6,929,668
Net profit/(loss) after tax
963,448
1,250,120
2,375,692
3,616,186
4,218,182
5,819,455
EPS(VND)
5,607
3,563
6,769
6,834
5,145
6,981
% change in
2008
2009
2010
2011
2012
Operating profit/ (loss) (%)
52.0
97.4
40.4
30.4
39.6
EBIT (%)
42.5
102.7
55.8
17.0
39.5
Net profit/ (loss) before tax (%)
43.5
99.2
55.6
17.1
39.2
Net profit/ (loss) after tax (%)
29.8
90.0
52.2
16.6
38.0
EPS (%)
-36.5
90.0
1.0
-24.7
35.7
51
The operating profit of Vinamilk increased year by year with the growth rate higher than
the growth rate of revenue that is the result of good control the expenditure in cost of
good sold and the selling, administrative and general expense and the gain from others
income from fiancial activities . In 2009 the operating profit went up with 97.36%
compare to 2008 due to the amount gain from liquidation activities. The earning before
interst and tax ( EBIT) moved the same way with operating profit. The growth rate in net
income of vinamilk ( net profit after tax) fluctuated during this period, but it increased
faster than the growth rate in revenue each year except 2011. In 2008 and 2009, although
the financial crisis and the melanine scandal that affected heavily on the dairy industry
due to China is one of the countries that exported the powder raw material to Vietnam ,
VNM’s net profit still went up. In those year, some small company like Hanoimilk,
Bavimilk,… affected heavily by this scandal and Hanoimilk reported the net loss in 2008,
because it is not got the high reputation as the Vinamilk do so the customers worried
about the sources of those firms. In 2010, Vinamilk got the abnormal income from
selling Sai Gon coffee factory in which the price is nearly 700 billions VND and the
book value of this factoriy is more than 300 billion VND, so the growth rate in net profit
went up faster to 52.2% compare to 2009. Moreover , the coumpound annual growth rate
for net income was 48.9% during 2008 and 2012, this was the desirable rate for all
companies in general and for vinamilk in specific. Therefore, the net profit of vianmilk is
promissing to go follow up this trend in the future. This is the good point for both dairy
industry and Vinamilk’s investors.
In general, the cost saving can help the company genrate more profits. Therefore, with
the strategy of Vinamilk is cost leadership, Vinamilk invest strongly on the sources of
material such as asscociate to building the new factory in New Zealand, expanding the
herd cow to save cost of goods sold. Besides, by divest some ineffective investment and
focus on the core business, Vinamilk can building the strong brand name on milk and
enhanced their market share
52
Earning per share didn’t move the same way with net income in 2008, 2010 and 2011
that was the result of issuing more share of Vinamilk in these years.
4.1.2. Common size income statement analysis
Common size income statement analysis is the express all items in income statement as a
percentage of net sales. It is used to determine the percentage of each account in sales
changing each year and compare it with those of others firms to see how well the VNM
performance.
COMMON SIZE INCOME STATEMENT
2008
2009
2010
2011
2012
Net sales
1.00
1.00
1.00
1.00
1.00
Cost of goods sold
0.68
0.63
0.67
0.70
0.66
Gross profit
0.32
0.37
0.33
0.30
0.34
Financial income
0.03
0.04
0.03
0.03
0.02
Financial expenses
0.02
0.02
0.01
0.01
0.002
in which: interest expense
0.00
0.00
0.00
0.00
0.00
S, G and A expenses
0.16
0.14
0.12
0.11
0.11
Operating profit/(loss)
0.16
0.24
0.23
0.22
0.25
Profit/(loss) from other activities
0.02
0.01
0.04
0.01
0.01
-0.01
0.00
0.00
0.00
0.00
Net profit/(loss) before tax
0.17
0.26
0.27
0.23
0.26
Corporate income tax
0.01
0.03
0.04
0.04
0.04
minority interest
0.00
0.00
0.00
0.00
0.00
0.15
0.22
0.23
0.20
0.22
Share of profit/(loss) in equity
accounted investees
Net profit/(loss) after tax
Cost of goods sold made up the large majority in total revenue. This percentage
decreased from 68% in 2008 to 63% in 2009. However, in 2010 and 2011, it increased to
53
67% and 70% of total sales, respectively due to the increase in both CPI and the high
price of imported milk. After that, in 2012 this ratio dropped to 66% because the world
price milk down and Vinamilk took advantage from CPI decrease and the volume output
of Vinamilk’s breeding activities went up so Vinamilk more active in their fresh milk
material, meanwhile the amount of net income in net sales increased from 0.2 in 2011 to
0.22 in 2012. Consequently, saving in cost of goods sold is the key strategy to push up
the profit. The portion of financial income in net revenue is relatively stable, ranging
from 3% to 4%. In 2009 this level of financial income higher than others year, at 4% of
net sales because the money receive from transfer all the share of SAB Miller joint
venture with 139,577 million VND. The ratio of financial expense in revenue decrease
significantly from 0.02 in 2008 to 0.002 in 2012, that is the remarkable point present
VNM restricted their borrowing and other financing on debt. Although the growth rate in
selling and administrative expense increased every year as analyzing above in percentage
change analysis, their portion as percentage of sales went down, with the ratio went down
from 0.16 in 2008 to 0.11 as percentage of sales in 2012 that mean VNM saved their
outlays efficiently. In comparison with the fluctuation in percentage change in net profit,
the portion of them in net sales went up, except 2011 it decreased slightly by 2% due to
the abnormal return from selling Sai Gon Coffee factory in 2010 so that lead net profit in
2010 up surged significantly. It is concluded that the proportion of income as percentage
of net sales nearly remain unchanged. Thus, Vinamilk need to continuously promote
strategy in saving material cost and other expenditure to have higher increase in net
income.
4.2. Balance sheet analysis
4.2.1 Percentage change balance sheet analysis:
54
Percentage change in balance sheet analysis gives the general view about the variation of
each account on balance sheet over years so that
can understand the VNM’s
performances.
Percentage change in :
2008
2009
2010
2011
2012
Current assets
0.3%
59.0%
16.8%
59.9%
17.4%
187.4%
25.8%
44.0%
414.5%
-60.3%
-42.9%
518.8%
-24.7%
-57.8%
431.1%
Total account receivable
-1.3%
12.7%
54.4%
92.8%
3.6%
Inventory
6.0%
-26.1%
79.3%
39.2%
6.1%
-29.5%
441.8%
-69.5%
51.9%
72.4%
Cash and cash equivalent
Short-term
financial
investment
Other-current assets
As a whole, the current assets of Vinamilk increased every year, but the growth rate
varied from 2008 to 2012.
In 2011, the growth rate of cash and cash equivalent increased dramatically that was the
result of the big amount of money deposit at bank with the maturity less than 3 months.
From 2010 up to now, Vinamilk invest in 3 new factories so Vinamilk keep the big
amount in cash and cash equivalent was used to disburse for those projects and also the
account payable. In 2012, although the amount in cash and cash equivalent was still high,
at 1,252,120 million VND, its growth experienced the negative rate because in this year
Vinamilk disbursed 3,111 billion VND for those project invested in plants.
The total account receivable fluctuated during this period. In 2010 and 2011, Vinamilk
had the high growth in sales with 48.42% and 37.29% in respectively, but the growth in
account receivable was much higher than sales, with 54.4% and 92.8% compared to
prior year, respectively, so the sale on credit of Vinamilk was quite big. Although, high
receivable turnover that mean company take competitive strategy from giving the
customers more days to pay back the amount of money, Vinamilk should reduce the
55
amount in account receivable because the growth rate is quite high to prevent the risk
from some insolvent customers and receive quickly amount of money sell on account to
invest in other production activities. Fortunately, the growth rate in account receivable
drop significantly from 92.8% in 2011to 3.6% in 2012 that means Vinamilk decreased
the sales on credit due to 2012 the economic is downturn, and Vinamilk want to have
more cash to pay for project of building new factory.
As can be seen, In 2010, VNM has high growth rate on inventory because in that time the
global milk price was forecasted continuing climb in 2011, VNM reserve more raw
materials to deal with the increase in price of inputs. However, this is just the solution for
short-time because milk is the material has the short usage time. Therefore, it can be seen
that in 2011and 2012 the growth rate in inventory reduced to 39.2% and 6.1%,
respectively.
Percentage change in :
2008
2009
2010
2011
2012
Long-term assets
23.7
22.8
42.2
26.0
40.4
Long-term receivable
-37.7
1757.3
-99.7
-100.0
Fixed assets
18.0
30.4
35.8
47.1
59.4
0.0
266.8
-0.1
-3.9
Investment properties
Long-term assets increased with the changing growth rate. The growth rate in fixed asset
went up each year because VNM has invested more on new factories and high technology
equipment to raise the production capacity. Especially from 2010 to 2012, the growth rate
in fixed assets were very high that was the result of the big investment in building
Vietnam dairy factory, Vietnam powder milk factory, Da Nang dairy factory and
expanding Lam Son dairy one member LTC, Vietnam dairy cow One member LTC and
other projects with the total capital investment is 10,275 billion VND up to 2016 and
until 2012 the total budget that was already paid is 7,109 billion VND. In recent years,
the real estate market has had difficulty so the investment in properties of VNM reduced.
56
Percentage change in :
2008
2009
2010
2011
2012
A. Liabilities
7.6
72.5
41.1
10.6
35.4
I. Current liabilities
4.2
78.4
52.5
11.4
40.7
1. Short-term loan
1789.2
-92.9
4175.8
-100.0
2.Account payable
-20.7
60.4
37.9
68.1
22.8
3.Other short-term liabilities
-3.4
219.4
6.0
13.0
70.1
II. Long term liabilities
30.1
40.9
-36.2
-2.8
-62.4
Long term borrowings
-30.8
-44.4
-100.0
Other long term liabilities
48.4
52.9
-32.9
-2.8
-62.4
As a whole, the growth rate in Liabilities had the decreasing trend from 2009 to 2011,
with 72.5% to 10.6% respectively. In 2012 this growth rate got back to increase to 35.4%
due to the considerable increase on others short-term liabilities. At the end of the
accounting year 2011 and 2012, VNM had no short-term debt on their balance sheet that
mean VNM borrowed and paid out all short term debt within a year, so Vinamilk is high
solvency. Although in recent years VNM had built 2 biggest factories in Asia, 1 medium
factory in Da Nang and improved many factories and farms with advanced technologies,
VNM had no long term debt from 2010 until now. Thus, VNM has had a high owners’
capital. The growth rate in account payable fluctuates during 2008 to 2012, but this ratio
is quite high and moved the same trend with the growth rate in receivable which can be
analyzed above, so it is implied that Vinamilk need to have the strategy to reduce the sale
on credit to have more money paying back to supplier and invest more in others
activities. The long-term liability decreased significantly from 2010 because VNM had
no long-term debt from 2010 by strongly financing on equity.
Percentage change in :
2008
2009
2010
2011
2012
B. Owners’ Equity
10.3
35.6
23.4
56.7
24.2
Share capital
0.0
100.4
0.5
57.5
50.0
57
The share capital of Vianmilk increased every year that is the result of issuing more share
of company. In 2009, the share capital of company increased double the amount in 2008
because in this year Vinamilk issued 364,640 shares for their staffs and 175,624,990
bonus shares with the ratio 1:1. In 2010 the share capital went up 0.5% compare to 2009
due to the amount money receive from issuing 1,806,820 ESOP share for their
employees. In 2011, along with issuing common stock for employees with 17,753,434
shares and 185,289,204 stocks with the rate 2:1 for existing shareholder that push the
share capital climbed 56.7%. In 2012, with the high in owner’s equity, Vinamilk issued
bonus share to stock holder with the rate 2:1 to raise the share capital. Therefore, with the
high share capital, Vinamilk can strengthen their powerful in financial resources that
helps Vianmilk create more competitiveness in the market.
4.2.2 Common-size balance sheet analysis
COMMON-SIZE VERTICAL INCOME STATEMENT
2008
2009
2010
2011
2012
A. Current assets
0.53
0.60
0.55
0.61
0.56
cash and cash equivalent
0.06
0.05
0.06
0.20
0.06
short-term financial investment
0.06
0.27
0.16
0.05
0.20
account receivable
0.11
0.09
0.10
0.14
0.11
in which: trade account receivable
0.09
0.06
0.05
0.07
0.06
Inventory
0.30
0.15
0.22
0.21
0.18
other-current assets
0.01
0.03
0.01
0.01
0.01
B. Long-term assets
0.47
0.40
0.45
0.39
0.44
long-term receivable
0.00
0.00
0.00
0.00
0.00
Fixed assets
0.32
0.30
0.32
0.32
0.41
Investment properties
0.00
0.00
0.01
0.01
0.00
long term financial investments
0.10
0.07
0.11
0.05
0.01
ASSETS
58
good will
0.00
0.00
0.00
0.00
0.00
others long term assets
0.04
0.03
0.02
0.01
0.01
1
1
1
1
1
A. Liabilities
0.19
0.23
0.26
0.20
0.21
I. Current liabilities
0.16
0.20
0.25
0.19
0.21
1. short-term loan
0.03
0.00
0.05
0.00
0.00
2.account payable
0.08
0.09
0.10
0.12
0.11
3. other short-term liabilities
0.05
0.11
0.09
0.07
0.10
II. Long term liabilities
0.03
0.03
0.02
0.01
0.00
long term borrowings
0.00
0.00
0.00
0.00
0.00
other long term liabilities
0.03
0.03
0.02
0.01
0.00
B. owners’ Equity
0.80
0.76
0.74
0.80
0.79
share capital
0.29
0.41
0.33
0.36
0.42
share premium
0.18
0.00
0.00
0.08
0.06
treasury stocks
0.00
0.00
0.00
0.00
0.00
Funds
0.19
0.24
0.23
0.09
0.03
retained earnings
0.13
0.11
0.18
0.27
0.26
minority interest
0.01
0.00
0.00
0.00
0.00
1
1
1
1
1
TOTAL ASSETS
LIABILITIES
AND
OWNER'S
EQUITY
TOTAL EQUITIES AND OWNER'S
EQUITY
As a whole, the structure of Vinamilk’s assets and resources was nearly stable. The
owner’s equity made up nearly 80% of total resources. As the result, VNM is selfcontrol their capital and not depend too much on liabilities.
59
Figure 15: Vinamilk’s capital structure
Another good point was that the current asset constituted approximately 60% of total
assets; meanwhile the current liabilities covered nearly 20% of total resources, so VNM’s
solvency has been strong.
The proportion cash and cash equivalent of Vianmilk accounted for 5% to 6%, except in
2011, it rose to 20% due to the big amount of money in cash equivalent.
From 2009 up to now, the inventories occupied about 20% of total assets. Additionally,
although, in recent years, VNM had been in the period of expanding production capacity
and productivity that made the material required for production are large; they still kept
the portion of nearly 20%.of total assets. Thus, Vinamilk is good at inventory
management.
Fixed assets increased significant from 32% in 2008 to 41% of total assets in 2012
because Vinamilk had invested strongly in building 3 new factories, expanded in existing
factories and equipped high-technology in production process to satisfy the demand of
customer with high quality products and can reach the objective 3 billion USD in
revenue.
60
The proportion of a trade account receivable in total assets accounted 5% to 9% of total
assets, meanwhile the trade account payable cover 8% to 12% of total resources, that
mean the amount of money VNM paid to suppliers were less quickly than those portion
received from customers. Therefore, VNM didn’t take too much risk in shortage of
money paid out to suppliers.
In the structure of debt of Vinamilk, the borrowing accounted for very small amount of
total resources. In 2011 and 2012, Vinamilk didn’t have borrowing at all at the end of
accounting fiscal year. It built the strong belief in creditor about solvency, but no debt is
the same with Vinamilk was not take advantage of reducing tax burden from interest
expense.
In owner’s equity, the share capital covered the big amount of total resources. From
2010, the share capital is upward trend from 33% to 42 % of total resources in 2012. That
made Vinamilk stronger in financial ability to investment and competitive activities.
4.3 Statement of cash flow analysis
Mill VND
Cash flows from operating activities
Net cash inflows from operating
activities
Cash flows from investing activities
Purchases of fixed assets and
constructions
Net cash (outflows)/inflows from
investing activities
Cash flows from financing activities
Proceeds from issuance of shares
Dividends paid
Net cash (outflows)/inflows from
financing activities
2008
2009
2010
2011
2012
1269759
3096503
2018774
2411169
5294568
(445062)
(654817)
(1432288)
(1767206)
(3133999)
(531785)
(2476274)
(643051)
6007
(4973661)
0
(680,733)
3646
(351,281)
18068
(1,765,200)
1454528
(741,428)
0
(2,222,994)
(517149)
(532691)
(1188384)
126247
(2224976)
61
The statement of cash flow presents the cash inflow and outflow through the year of an
enterprise.
In general, it is clearly observed that that net cash flow from operating activities was
positive, and the net cash flow for investing and financing activities were negative, so
Vinamilk is developed enterprise and that cash inflow from operating activities can use to
pay for long-term investments and paying dividends.
As can be seen clearly the cash came in from operating activities increase every year, that
is the good signal because the investors always invest in the company that have positive
cash flow from operation to anticipate the company’s ability to paid out their dividend or
paid borrowing.
The net cash out flow for investing in fixed assets increase significantly every year
because Vinamilk is in the process of expanding their capacity and technology to meet
the growing demand of domestic in specific and foreign countries in general and tend to
approach the goal to be the one of 50 biggest dairy companies in the world.
The net cash flow from financing activities of Vinamilk in general is out going, mostly to
paid dividends. In 2011, the small amount of cash inflow in financing activities is the
result of issuing 17,753,434 shares for staffs and that amount gain from share premium
were in excess of dividend paid out. In 2012, although the share capital of Vinamilk went
up 2,778,410.42 million VND, but that amount was the portion of money gain from
issuing bonus share from Vinamilk’s equity capital. Thus, in 2012 Vinamilk used its
money from retained earnings and other funds to push the rise in share capital, so the
proceeds from issuance share are zero. Therefore, the payment for dividends lead the
cash from financing activities is negative amount.
In brief, it is seen that Vinamilk had experienced a good performances in managing
working capital to generate the positive in cash from operating activities, along with the
62
strong in equity’s capital and the suitable invest in fixed assets, so the cash and cash
equivalent at the end of each year is quite higher than other peers.
4.4 Financial ratios
4.4.1 Liquidity ratio
Liquidity ratio is the useful tool to measure the ability of Vinamilk to pay out their shortterm obligation.
We have the liquidity ratio for Vinamilk over 5 year in table below:
Table 12: Liquidity ratio
LIQUIDITY RATIO
Current
VNM
ratio
Food producer sector
Quick
VNM
ratio
Food producer sector
2008
2009
2010
2011
2012
3.28
2.92
2.24
3.21
2.68
1.75
1.71
2.19
1.73
2.17
1.35
2.10
1.84
1.23
1.13
1.62
1.26
1.45
Cash ratio
0.35
0.25
0.23
1.07
0.30
WC to total assets
0.37
0.39
0.30
0.42
0.35
The current ratio is the common measurement for short-term liquidity. Vinamilk‘s current
ratio had the downward trend during 2008 and 2012, except 2011 with the ratio 3.21.
However, that current ratio was quite high which is over 2.5 times of current liabilities. In
comparison with the average current ratio of food producer industry, VNM has the far
higher ratio than this industry that means Vinamilk had high ability to cover their shortterm liabilities. In some occasion, inventory is not mean as the liquid assets, so the quick
ratio which is calculated by the current asset minus inventory divided current liability is
the appropriate way to define the company liquidity. The Vinamilk’s quick ratio moved
the same trend with current ratio. In 2008, 2010and 2011, Vinamilk had high portion of
63
inventory in total assets so that the quick ratio went down significantly. However, that
ratio is higher than 1, so VNM created the good impression on creditor and that make
VNM can easy to raise funds by borrowing in short-term periods.
The cash ratio is the way to measure the Vinamilk‘s ability to deal with emergency shortterm solvency. VNM’s cash ratio was changing during 2008 to 2012; especially in 2011
VNM has high leisure cash on hand, with the cash ratio 1.07. In others year, the cash
ratio of VNM is more than 0.2x, so is a bit low.
All in all, it can be seen that the liquidation of Vinamilk in short-term is very good,
Vinamilk has more cash on hand to pay for their supplier and also investing operational
production.
4.4.2 Long-term solvency ratio
Long-term solvency ratio, that is the useful tool to determine the Vinamilk’s capital
structure, how they finance their capital and their ability to cover long-term debt. The
company may rely on debt financing or their own shareholder equity. Using more debt
can help the firm reduce the tax from tax shield of interest expense but it affect to
shareholder return and operational activities, so the firm should have suitable
performance strategy.
Table 13: Long-term solvency ratio
LEVERAGE RATIO
Liabilities / Total assets
Liabilities / Equity
VNM
2008
2009
2010
2011
2012
0.19
0.23
0.26
0.20
0.21
0.36
0.39
0.36
0.43
0.31
0.35
0.25
0.27
0.57
0.67
0.64
0.85
1.31
1.35
1.25
1.27
1.60
1.73
1.78
1.99
0.004
0.07
0.00
0.00
Food producer sector
0.24
VNM
Food producer sector
1.25
Equity multiplier
VNM
(Total assets/ total equity)
Food producer sector
Debt to equity
VNM
0.04
64
cash coverage ratio
VNM
56.46
444.60
734.80
386.11
2395.51
Time interest earned ratio
VNM
49.84
409.42
687.79
356.35
2223.61
The table above reveals that the debt to equity ratio of Vinamilk was very low and was
zero in recent years The highest ratio is in 2010 at 0.07 because Vinamilk borrowing 30
million USD from foreign banks to pay for oversea supplier. By receiving debt from the
foreign banks, Vinamilk took less risk compare to others previous year received loan
from domestic banks because borrowing from foreign banks to paid out money to over
sea supplier, Vinamilk just took risk on exchange rate difference, but getting the loan
from domestic will make Vinamilk face both exchange rate exposure and the high in
interest rate. As can be analyzed in balance sheet analysis, after the last amount of long
term debt VNM borrowing in 2009, VNM has not borrowed any long-term loan at all.
So, the debt to equity in 2010 is the amount that company borrowed in short -term to
cover the payable amount oversea. In 2011 and 2012, the debt to equity was zero because
VNM had no debt in both short and long term account at the end of the fiscal accounting
year, but during this year VNM still had some short-term borrowings and paid out all of
them during the year. Consequently, VNM is not depend much on debt financing and has
had strong solvency than others competitors.
The liability accounted for around 20% of total resources. The level of liabilities to total
assets increased from 0.19 in 2008 to 0.26 in 2010 and then in 2011 an d 2012 this ratio
decreased to 0.20 and 0.21 in respectively. Meanwhile, The average ratio of others
company in food producer sectors is increased from 0.36 in 2009 to 0.43 in 2012. Thus, it
means that others peer had high reliance on debt financing. The remarkable point is that
VNM has constructed 3 new factories from 2010 up to now, but they did not borrow
money to pay out for those projects, it means that Vinamilk had strong equity capital.
Therefore, Vinamilk is less risk than other firm in food producer that had the high
financial leverage.
65
The times interest earned ratio is measure how efficiency Vinamilk covered their interest
expenditure. It is computed by dividing earnings before interest and tax by interest
expense. Vinamilk’s time interest earned ratio is surge from 49.84 in 2008 to 2223.61 in
2012 due to the reducing in financing on debt so Vianmilk had high solvency for their
financial obligation.
The earnings before interest and tax including depreciation expense, it is treated as noncash charge, so cash coverage ratio are the more appropriate to determine the actual the
Vinamilk’s availability of cash to pay out their interest. This calculates by take the total
of the earnings before interest and tax plus the depreciation divided by interest expense.
The table presents that the cash coverage ratio of Vinamilk increased dramatically from
56.46 in 2008 to 2395.5 in 2012. The higher the cash coverage ratio the more abilities
Vinamilk could cover their liabilities, so Vinamilk had strong financial power to cover
their interest expense. The Vinamilk’s creditor feel safety when they lending money to
Vinamilk.
4.4.3 Asset management ratio
Assess management ratio measure how the company using its assets to create sales. By
looking at these ratios, the efficiency of company operational management is determined.
Table 14: Asset management ratio
ASSET MANAGEMENT RATIO
The
Inventory
Turnover
Days sale in inventory
Receivable turnover
Days sale in receivable
VNM
2008
2009
2010
2011
2012
3.16
5.13
4.50
4.60
5.03
5.14
5.29
5.34
81.13
79.42
72.50
70.98
68.96
68.34
14.00
9.97
11.82
21.80
22.73
22.09
26.06
36.61
30.87
Food producer sector
115.49
VNM
71.09
Food producer sector
12.70
VNM
14.57
Food producer sector
28.74
VNM
66
25.06
Food producer sector
payable turnover
days sale in payable
Cash conversion cycle
11.39
VNM
8.53
Food producer sector
32.04
VNM
42.81
Food producer sector
112.19
VNM
Food producer sector
53.34
16.75
16.06
16.52
9.71
8.21
7.78
13.10
13.30
11.40
37.59
44.44
46.92
27.87
27.44
32.01
69.60
71.59
56.44
59.85
57.58
52.85
The inventory turnover measure how efficient the company sold out their stock.
Vinamilk’s inventory turnover increased from 3.16 in 2008 to 5.03 in 2012. Although
Vinamilk has slightly lower ratio in comparison with the average inventory turnover ratio
of others company in food producer sectors, with the ratio ranging from 5.14 in 2010 to
5.34 in 2012, it didn’t mean Vinamilk’s products through a slump because Vinamilk kept
more material on stock in order to dealing with the increase in price of material, by doing
that, Vinamilk could keep the good price to customers. Additionally, this growth in
inventory turnover is use to adapt in expanding capacity in recently years that is required
the big amount of material for production, so Vinamilk had been good at inventory
operation.
The receivable turnover of Vinamilk reduced from 2009 to 2011, and then rose to 11.82
in 2012. However, this level was quite lower than the average ratio of food producer
67
sector, with the rate from 21.8 in 2010 to 22.09 in 2012, Vinamilk was not as quickly as
collecting sale on account from customers than others peer. However, in the market
nowadays, there are many companies do in dairy business, so the low in receivable
turnover is also mean as an advantage competitive with others peers because when
Vinamilk set the time to collect sales on account for customers longer than others
competitor so they can maintain the loyalty of customers and attract more customers .
The payable turnover of Vinamilk deceased from 11.39 in 2008 to 7.78 in 2012 that
means Vinamilk paid out their payable to supplier slower than others company in the
same sector, with the ratio from 13.1 in 2010 to 11.4 in 2012. That is can be determined
that Vinamilk may have good reputation, thus it can take advantage of paying money late
to suppliers. Therefore, maintain the low in payable turnover help Vinamilk may get
more money on their investment with no interest expense. As can be seen clearly, the
receivable turnover of Vinamilk was higher than the payable turnover, so Vinamilk kept
their supplier’s money longer than the amount received from customers. This proves that
Vinamilk has good solvency because they can collect quickly the money sale on account
before spending to suppliers. Therefore, the decrease trend in payable turnover that is the
good signal for Vinamilk can hold capital of other suppliers.
The cash conversion cycle indicate the time the money from buying inputs converts to net
sale. The lower the cash conversion cycle, the more efficient the firm manage its assets.
Although, the cash conversion cycle of Vianmilk is higher than the average of industry, it
reduced significantly from 112.19 day in 2008 to 56.44 day in 2012, which means
Vinamilk try to using their asset more effective.
total asset
VNM
turnover
Food producer sector
2008
2009
2010
2011
2012
1.38
1.25
1.46
1.39
1.35
1.09
0.86
0.83
0.81
68
The assets turnover of Vinamilk generally more than half as many again as the average
ratio of assets turnover in food producer sector, that means Vinamilk can generate more
sales from its assets investment. The Vinamilk’s asset ratio rose from 1.25 in 2009 to
1.46 in 2010 and after that in fell out to 1.39 and 1.35 in 2011 and 2012, respectively
because in this period Vinamilk invest more on fixed asset for building 3 new factories so
that sale over total assets deceased. We hope that from 2013 to future VNM will utilize
their productivity by the increasing impressively of its capacity from 1.1 million tons in
2012 to 1.6 million tons in 2013 to push this ratio go up.
4.4.4 Profitability ratios
Table 15: Profitability ratios
PROFITABILITY RATIOS
Profit margin
Return
on
assets(ROA)
Return
on
equity(ROE)
Financial leverage
2008
2009
2010
2011
2012
VNM
0.15
0.22
0.23
0.20
0.22
Food producer sector
0.06
0.12
0.18
0.14
0.12
VNM
0.21
0.28
0.34
0.27
0.30
Food producer sector
0.08
0.14
0.15
0.11
0.10
VNM
0.26
0.37
0.45
0.34
0.38
Food producer sector
0.14
0.22
0.27
0.20
0.20
VNM
1.25
1.31
1.35
1.25
1.27
Food producer sector
1.67
1.60
1.73
1.78
1.99
The profitability ratio measures the earning to investors. The investors tend to prefer to
invest in the company that generates more profitability ratios. This ratio is the useful to
indicate how efficient the company’s performance.
The profit margin defines how well the firm generates the profit from net sale. This ratio
went up considerably from 0.15 in 2008 to 0.22 and 0.23 in 2009 and 2010, respectively.
It was the result of the profit that VNM convert from not only selling product and service
but also the abnormal return in liquidation SAB miller’s share and selling coffee
69
factories. In 2011 this ratio went down to 0.2 and then climbed to 0.22 in 2012. Thus, the
increase in profit margin ratio make the impressive on financial performance of
Vinamilk, it had good strategy to control all the expenditure to generate more profit.
Vinamilk has higher ratio in comparison with the average ratio of food producer sector,
with 0.06 in 2008 to 0.12 in 2012. Therefore, with each dollar receive from sales,
Vinamilk is able to convert more money into profits than others company in the same
sectors.
The return on assets (ROA) indicates how efficiency the company generates the profit
from assets. The table illustrates the Vinamilk’s ROA with 0.21 in 2008 to 0.3 in 2012 is
far higher than the average ROA of others peers in food producers sector with 0.08 in
2008 to 0.1 in 2012, so with every dollar invested on the assets, Vinamilk can generate
more profit than others peer. As a whole, ROA of Vinamilk is an increased trend from
0.21 in 2008 to 0.3 in 2012, especially, in 2008 and 2009, although the financial crisis
affect heavily to economic, VNM has the rise in ROA from 0.21 in 2008 to 0.28 in 2009.
The relation Between ROE and ROA:
ROE
=
=
Profit margin X Asset turnover X Financial leverage
ROA
X Financial leverage
As can be seen, the financial leverage of Vinamilk almost stable during 2008 and 2012,
so the ROE has the same movement with ROA. The ROE rose with the increased trend,
except 2011 because the high in cost of goods sold that made the profit down. The
upward trend in ROE presents that the return on resources that is contributed by owners
went up. In comparison with the average level of food producer sector, although the
financial leverage ratio of other peers was high, VNM still has higher ROE than them.,
Financing on debt can help the company rise up their ROE, but the interest expense hurt
70
company’s profit that push ROE down turn. Thus, Vinamilk manage efficiency on both
operating and using assets.
 Du point analysis:
Vinamilk
2008
2009
2010
2011
2012
Profit margin
0.152
0.224
0.230
0.195
0.219
X Total asset turnover
1.376
1.251
1.462
1.388
1.348
X Financial leverage
1.253
1.314
1.353
1.249
1.271
= ROE
0.263
0.368
0.454
0.338
0.376

If the assets turnover and financial leverage still remain the same rate in 2011 and
the profit margin increase by 0.024 point from 0.195 in 2011 to 0.219 in 2012, the
ROE will be : ROE’= 0.219 *1.388*1.249 = 0.3797
 ROE go up by 0.0417 compare with ROE in 2011, if the profit margin
climb by 0.024

If the Profit margin and financial leverage keep unchanged at the level in 2009and
the total assets turnover increase by 0.211 from 1.251 in 2009 to 1.462 in 2010,
the ROE will be: ROE’’ = 0.224*1.462*1.314 = 0.430.
 ROE’’ go up by 0.062 compare with ROE in 2009 when the total asset
turnover increase 0.211

If the profit margin and total assets turnover remain stable at the ratio in 2011 and
the financial leverage increase by 0.022 from 1.249 in 2011 to 1.271 in 2012, the
ROE will be: ROE’’’= 1.271*1.388*0.195 = 0.344
 ROE increase by 0.006 compare when the financial leverage goes up
0.022 point.
Thus, it is concluded that the increase in profit margin lead to the significant rise in ROE.
Therefore, Vinamilk need to have the high profit margin to push ROE high. Actually, the
71
net profit in 2012 is increase faster than the net revenue due to the cost saving, so the
profit margin went up from 0.2 in 2011 to 0.22 in 2012. Currently, the global milk
material goes up; it will hurt the Vinamilk’s net income. However, depending on the
expanding breeding activities, the association with the Miraka Factory in New Zealand
and the Vietnam CPI expected to decline, Vinamilk expect to stay in high and stable in
profit.
72
CHAPTER V
FORECASTING AND VALUATION
5.1 Forecasting
According to the demographic issues, it can be seen that the proportion of urban
population increased from 24.3% in 2000 to 29.7% of total population in 2012. This
number is expected to reach 33.9% in 2020. That contributes significantly to the milk
consumption and the revenue of dairy companies as well.
Vinamilk is in the process of expanding their capacity to meet the goal 3 billion dollar in
2017. Therefore, the capacity of total Vinamilk’s factories increase considerably from
677,150 tons in 2010 to nearly 930,000 tons in 2011due to operate Tien Son factories
with the capacity of condense milk: 85 million can/ year, yogurt: 36 million liter /year,
liquid milk and juice fruit: 120 million liter per year, ice cream: 2 million liter/year and
soya milk: 56 million liter/year. In 2012, the Da Nang factory operated, so the capacity of
Vinamilk in 2012 is nearly 1.1 million tones. In 2013, Vianmilk put 2 big factories into
operation in which the Dielac 2 factories with the capacity54 000 tons per year, equal
four times of Dielac1 factory; the Vietnam Dairy factory has the capacity equal the
capacity of total 9 VNM’s factories, 400 million liter per year in
the first phase.
Additionally, the expanding of Lam son factories with the capacity 83,900 is expected to
finish in 2013. Therefore, in 2013, the capacity is raised to nearly 1, 587,900 tones.
In 2017, the Vietnam Dairy factory is upgraded to have the capacity 800 million tons per
year, so the total capacity assumes to be nearly 2 million tons per year.
73
Thus, with the significant increase in capacity and advanced in technology, it is hope that
VNM will have the high growth in revenue.
Table 16: The Capacity of Vinamilk
Tone
2010
2011
2012
2013
2017f
Capacity (tons)
677,150
930,000
1,100,000
1,587,900
1,987,900
According to the Vinamilk sustainable report, the productivity of Vinamilk went up every
year as well. In 2011, the productivity is increase 20% compare to 2010, and in 2012 this
growth is 16%. As can be observed, Vinamilk is run approximately 70% of its capacity
each year. It assumes that VNM will run about 60% to 100% capacity in the future.
Table 17: Vinamilk productivity
Productivity (tons)
2010
2011
2012
553,810
662,146
768,552
20%
16%
% change
The breeding activities of Vinamilk are developing, so it helps Vinamilk gain the
initiative on the material and control the high standard quality. Although the total fresh
milk purchasing is occupy the vast majority of fresh milk material, the number of output
fresh milk from VNM breeding climbed from 6% in 2010 to 12% in 2012. Besides, VNM
is more and more expanding in breeding activities by invest 1,500 billion VND to build 4
new cow farms. By doing that the number of dairy cattle of Vinamilk will forecast to
increase from 8200 heads in 2012 to 25,500 heads in 2015 and 28000 cows milk in 2016.
So, alongside with the improvement in breeding activities and expanding on dairy cattle
herd in Vietnam as well, VNM believes that they can be more active in fresh material
supply to production process.
74
Figure 16: The total fresh milk material of Vinamilk (millions of liters)
The Vinamilk’s net sale revenue by products segments presents the amount of money that
Vinamilk received by selling their products and service in each those segments. Liquid
milk, powdered milk and condensed milk took up the largest majority of the net sales
with more than 80% of total revenue. The revenue from liquid milk more and more
increased that replaced for the sale of condensed milk due to people nowadays changing
the products that are fresh and good for their health. It can be can seen that in 2008 the
liquid milk and condensed milk made up 27% and 29% of total sales in respectively, but
in 2012 the proportion of revenue is changed with 35% from liquid milk and 17% from
condensed milk. Powder milk has covered nearly 30% of total revenue and this number is
quite stable because the demand for this products is high. Although Vinamilk’s Yogurt
occupy 73% of yogurt market share which is drinking yogurt and spoonable yogurt, it
accounted nearly 17% of total sales in 2012. Besides, yogurt had a growing opportuinity
due to the benefits for health and is expected to have to upward trends in total sales.
75
Figure 17: Structure net revenue of Vinamilk
 Forecast revenue’s growth rate:
 Liquid milk
According Euro monitor report, the sales of liquid milk products in Vietnam increase
very year. From 2006 to 2011, along with the developing in economy and high growth
rate in GDP, the education in Vietnam has improved, so the awareness of people about
health is enhanced, people raised the concern on the products which are natural and high
nutrient. Therefore, the demand for liquid milk products is increase significantly with the
compound annual growth rate in value of dairy industry is 16.5%. From 2011 to 2016, the
demand for liquid milk, especially fresh milk is still growing due to the high living
standard of people and the fresh and nutrient of liquid milk, EMI assumed the ratio in
value to be 5.4% per annum. However, in comparison with the forecasted compound
annual growth rate in volume, this number decreased lower than the ratio in value, with
CAGR in volume (2006-2011) at10% and CAGR in volume (2011-2016) at 6.4%. The
reason for this difference was explained that the inflation of Vietnam in the period 2006 2011 fluctuated and quite high, while in the later period after 2011, the economic is more
stable, the CPI is predicted to go down and government try to decrease the imported tariff
76
and giving the base for the milk price, so EMI predicted the compound annual growth
rate in value is more lower than this ratio in volume
Table 18: Revenue of liquid milk in domestic dairy industry
VND bill
2006
2007
2008
2009
2010
2011
Liquid milk
4687.6
5320.6
6009.9
7195.4
8328.4
10089.8
14%
13%
20%
16%
21%
%change
VND bill
2011
2012f
2013f
2014f
2015f
2016f
Liquid milk
10089.8
10804
11477.1
12095.4
12645.4
13115
%change
21%
7%
6%
5%
5%
4%
CAGR
(06-11) in value
16.50%
CAGR(11-16)
in value
5.4%
CAGR(06-11) in volume
CAGR(11-16) in volume
10%
6.40%
Sources: drinking milk EMI report
As can be seen clearly, Liquid milk is the products segment that raises the concern in
many people nowadays. It has good value for both children and adult, so the revenue
from liquid milk account should be the highest part on total sale of Vinamilk.
From 2008 and 2012, liquid milk’s revenue of Vinamilk had the impressive compound
annual growth rate about 43% per annum. In comparison with the growth rate in value of
dairy industry that is analyzed above, Vinamilk has far higher growth rate than the
industry. In the later period from 2011 to 2016, EMI forecasted the growth rate of dairy
industry is 5.4% in value and 6.4% in volume. Vinamilk is the leader in this segment with
77
account for 40% market share. Besides, Vinamilk has invested strongly on distribution
channel through from the North to the South to exploit the new market in rural and
highland area and along with the Vinamilk’s development in production capacity in
liquid milk manufacturing, the increase in the number of dairy cattle herd, Vinamilk will
have the high growth rate on liquid milk’s sale. It is assumed that the first period from
2013 to 2016, the compound annual growth rate of liquid milk in Vinamilk is about
29.5% per annum in which in 2013 the ratio is 28% and then increase to 30% in three
year later because the capacity of producing liquid milk is nearly double when the
Vietnam dairy factory is put into production in the second quarter 2013, the investment in
Research and development is stepped up, Vinamilk will be more and more control on
their fresh material by investing strongly on cow farm, and the strong distribution
channel. In the next period from 2017 to 2020, the demand for this products remain high
because of their useful and fresh, but the competitions on this segment are more strictly
and harshly with many companies enter to this segment, so with the capacity in Vietnam
dairy factory is pushed up double the capacity in 2013, at 800 million liter, and the
promotion as advertising and PR of Vinamilk to build the brand loyalty of customer.
Therefore, it is predicted that the revenue of Vinamilk’s liquid milk still increase and the
growth rate in liquid milk’ sales reduce by 4 % per year up to 2020 because the growth in
the high volume is generally lower than the small volume. For the long way, when the
market is nearly saturate, the ratio is predicted to be 9% forever. The forecasted revenue
of liquid milk of Vinamilk for each year is presented in the table below.
Table 19: Forecast growth rate of liquid milk’s revenue of VNM from 2013 to 2017
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
28%
30%
30%
30%
26%
22%
18%
14%
Future
Growth rate of
VNM
liquid
milk ‘s revenue
78
9%
Forecast Revenue of Vinamilk's liquid milk
2013f
11,899,585.15
2014f
15,469,460.70
2015f
20,110,298.91
2016f
26,143,388.58
2017f
32,940,669.61
2018f
40,187,616.92
2019f
47,421,387.97
2020f
54,060,382.29
(2021f)
58,925,816.69
 Powder milk
Powder milk includes milk formula for baby, children and others powder milk for
expectant mother, breast-feeding mothers, elder people and so on. The powder milk of
Vietnam dairy industry went up with the compound annual growth rate 15.03% during
2008-2012 because the economic is more develop, people awareness about the value of
milk increase, especially for children. Parents in Vietnam are more and more focus on the
nutrient for their child, so the powder milk is the products that can meet this requirement.
During 2012-2016, due to the declining in birth rate, but the market in rural and highland
area is go up, along with the higher living standard, powder milk is assumed to increase
every year. EMI predicted that compound annual growth rate in value for powder milk in
dairy industry is 6.32% per year during 2012 and 2016. This rate is quite lower than the
ratio in 2008 and 2012 because, from 2008 and 2012, the price of milk due to the effect
of high inflation during this period and the government did not enforce policy to restrain
the price, so the growth rate in value in this period is high. Thanks to the expected
decrease in CPI in the future and government is enforce the policies that all the powder
milk for children less than 6 year old must be register to the ministry of finance before
79
increasing in price, so the price in the forecasted period is expected not grow higher as
the growth rate in 2008-2012.
Table 20: Revenue of powder milk in domestic dairy industry
CAGR(2008VND bill
2008
2009
2010
2011
2012f
Milk formula
7,836.8
9,210.2
10,778.5
12,849.5
13,834.1
1,548.6
1,792.0
2,087.7
2,403.9
2,600.0
9,385.4
11,002.2
12,866.2
15,253.4
16,434.1
17.2%
16.9%
18.6%
7.7%
Other powdered
milk
Total
% change
2012) in value
15.03%
CAGR(2012VND bill
2012f
2013f
2014f
2015f
2016f
Milk formula
13,834.1
14,806.6
15,708.1
16,517.1
17,213.5
2,600.0
2,837.7
3,112.0
3,429.0
3,788.8
Total
16,434.1
17,644.3
18,820.1
19,946.1
21,002.3
% change
7.7%
7.4%
6.7%
6.0%
5.3%
Other powdered
milk
2016) in value
6.32%
Sources: drinking milk report and baby food report of EMI.
Vinamilk’s Powder milk had the compound annual growth rate 34.1% during 2008 and
2012 in which 27.2% in 2012 is more double the growth rate in industry. As already
discussed, the raw material of powder milk is mainly imported from foreign country.
Additionally, the dairy production in the world is scarce due to the unexpected climate
80
and the increase in demand. However, the investment in Miraka factory in New Zealand
can help Vinamilk deal with this problem. Although, the large proportion in powder milk
market share belongs to foreign brand name, Vinamilk take up for 19% in this market
share. Vietnamese people
are beginning to use the Vietnamese products because the
quality is good and the price is lower than the foreign brand name. Thanks to the good in
research and development, Vinamilk‘s products has the high quality with international
criteria and good price, along with the exploitation in rural area, the company is
promising to have a high in growth rate of the powder milk’s revenue. Therefore, all in
all, I assume that the growth rate for this segment is 29 % in 2013. Besides, Vinamilk has
expanded their production in powder milk by building the Dielac 2 factory with the
capacity is quadruple the capacity of Dielac factory and put into operation in April 2013,
so the productivity will be increased. Although the global milk production is predicted
shortage in the future, Vinamilk still has the sources of supply for this products is more
stable than others company due to the investment in Miraka factory in New Zealand, so it
hope that the price of Vinamilk products will be more competitive with others peer. This
can help Vinamilk increase this ratio from 29% in 2013 to 30% each year in three years
later. In the next period, from 2017 to 2020, although the birth rate decrease, it is not
affect too much on the urban market – the main consumption of this products, and the
consumption in rural area go up, it is hoped that the revenue for this segment still grow
and predicted the ratio is reduced by 3 % each year in these year up to 2020 because the
growth in the high value base will be lower than the small value base. In the future, it is
forecasted that the growth rate for this segment is quite high 9% each year forever
because powder milk is necessary products not only for children but also for expected
mother, elder people and patient people.
81
Table 21: Forecast growth rate of powder milk’s revenue of Vinamilk.
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
Future
29%
30%
30%
30%
27%
24%
21%
18%
9%
Growth rate of
powder milk’s
revenue
Revenue of VNM's powder milk
Mill VND
2013f
9,936,684.8
2014f
12,917,690.3
2015f
16,792,997.4
2016f
21,830,896.6
2017f
27,725,238.7
2018f
34,379,295.9
2019f
41,598,948.1
2020f
49,086,758.7
(2021f)
53,504,567.0
 Yogurt
The yogurt segment is become more favor due to the health’s benefits. Yogurt is
continuing growth in both rural and urban region. Therefore, the compound annual
growth rate on yogurt’s revenue of dairy industry is about 20.9 % from 2007 to 2012.
Besides, EMI forecasted that yogurt will maintain the high growth in revenue during
2012 to 2017 as their wellness and the high living standard of people, with compound
annual growth rate 6% per annum. The same with others products on the price change
fluctuation, the growth volume is forecasted is not drop as much as the growth in value,
with 10.8% in 2007-2012 to 6.5% in 2012-2017.
82
Table 22: Yogurt revenue of domestic dairy industry
VND bill
Yogurt
revenue
VND bill
Yogurt
revenue
CAGR(07-
2007
2008
2009
2010
2011
2012
1,894.20
2,250.70
2,691.00
3,247.00
3,973.60
4,884.80
2012
2013f
2014f
2015f
2016f
2017f
4,884.8
5,283.5
5,655.3
5,985.7
6,283.1
6,540.3
12) in value
20.90%
CAGR (12-17)
in value
CAGR(07-12) in volume
CAGR(12-17) in volume
10.8%
6.5%
6%
Sources: EMI Yogurt and Sour milk
Yogurt is the strength segment products of Vinamilk with account for 73% of market
share in which 95% come from spoon able yogurt. Additionally, Vinamilk has researched
and developed many new products in this segment with the useful benefit tendency such
as real fruited yogurt, pro-beauty yogurt with contain collagen to keep the strong and
smooth skin, so it is expected Vinamilk maintain the high level in this segment. With the
CAGR from 2008 to 2012 is 43% per annum in which the ratio in 2012 is 30.5%, it is
forecasted that the growth rate in yogurt’s sales is 27% per year from 2013 and 2015.
However, recently, there are many firms enter into this field including both domestic and
foreign enterprise such as Yakult, Kinhdo… so there can be threaten for Vinamilk
markets. Therefore, from 2016 to 2020 this ratio will reduce by 3% each year. For longterm, it is predicted to keep at the rate 7% as its heath’s benefits and taste is better than
other drinking milk.
83
Table 23: Forecast growth rate of powder milk’s revenue of Vinamilk.
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
Future
27%
27%
27%
24%
21%
18%
15%
12%
7%
Growth
rate of
yogurt
Net Sales of VNM’s yogurt
Mill VND
2013f
5,734,643.8
2014f
7,282,997.7
2015f
9,249,407
2016f
11,469,264.7
2017f
13,877,810.3
2018f
16,375,816.2
2019f
18,832,188.6
2020f
21,092,051.2
(2021f)
22,568,494.8
 Condense milk
Condense milk is also the segment that Vinamilk is the leader in market share. However,
the demand for this segment is fewer and fewer because it contains a lot of sugar 46% per
product and not be fresh. Not only health’s benefits factors in condense milk are almost
no but also they cause several sicknesses in people life. To be more specific, in 2008,
they accounted for approximately 30% of total sale, but in 2012 they made up only 17%.
The compound annual growth rate for these products from 2008 to 2012 is 17.36%. With
the declining in using of these products and no special plan on development this segment
of Vinamilk, it is assumed that the growth in these products is a downward trend during
the forecasted period. In 2013 the ratio is expected 14% and drop by 1% each year up to
2020. In the long run, although the demand is decrease, Vinamilk is still the leader in this
84
area, along with the price increase every year due to inflation, it is forecasted that the
growth rate for condense milk is 4% forever.
Table 24: Forecast Growth rate in sale of Vinamilk’s condense milk
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
Future
14%
13%
12%
11%
10%
9%
8%
7%
4%
Growth
rate in
condense
milk

Revenue of VNM's condense milk
Mill VND
2013f
5,147,633
2014f
5,816,825
2015f
6,514,844
2016f
7,231,477
2017f
7,954,625
2018f
8,670,541
2019f
9,364,185
2020f
10,019,677
(2021f)
10,420,465
Other products
Other products of Vinamilk including soya milk, fruit juice, and pure water and so on
constituted about 3% in total sale. Among them, people these days raise the attitude to
soya milk because it has the source of vegetable, so it is more favorable for vegetarian
and for those who need more fiber. It is forecasted that it will have the growth rate 12%
in 2013 and go down by 2% every year up to 2016. Vinamilk’s other products have also
improved and Vinamilk offers many new products, along with the trusted brand name, it
85
is promised that the ratio will maintain 5% per annum from 2017 to 2020. In the future,
this segment will hope to maintain at 4% growth in sales.
Table 25: Forecast growth rate in sale of Vinamilk’s others product.
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
Future
12%
10%
8%
6%
5%
5%
5%
5%
4%
Growth rate
in other
products
Revenue of VNM's others product
Mil VND
2013f
594,979.3
2014f
654,477.2
2015f
706,835.4
2016f
749,245.5
2017f
786,707.8
2018f
826,043.1
2019f
867,345.3
2020f
910,712.6
(2021f)
947,141.1
In the end, the total revenue of each products segment is added up to get the total net
sales of Vinamilk as present on the table below:
86
Table 26: Forecast growth rate in net sale of Vinamilk
Forecast total net sales
Growth rate in net
( mill VND)
revenue
2012
26,561,574
2013f
33,313,526.11
25.4%
2014f
42,141,451.16
26.5%
2015f
53,374,383.04
26.7%
2016f
67,424,272.61
26.3%
2017f
83,285,051.31
23.5%
2018f
100,439,313.39
20.6%
2019f
118,084,054.46
17.6%
2020f
135,169,582.24
14.5%
(2021f)
146,366,484.12
8.28%
Thus, after 2020, Vinamilk is expected to have the growth rate on revenue about 8.28%
per year forever. According AC Nielsen, the Fast Moving Consumer Goods (FMCG) that
including dairy products, beverage, food, personal care, health care,... get the value 8
billon US$ in 2011 and expected have the average growth rate 12% per year for 10 years
to be got 20 billion US$ in 2021, dairy is the fast growing in FMCG, so the forecasted
growth rate for Vinamilk will be stable at 8.28% after 2020 is reasonable.
 Forecast cost of goods sold:
Table 27: CPI growth compare to the Average CPI monthly of previous year
CPI (% per year)
2012
2013f
2014f
2015f
2016f
9.1
7.7
6.4
4.8
4.5
Sources: Ernst & Young
87
According to the Ernst & Young Rapid-Growth Markets Forecast April 2013, thanks to
the government policy to restrain the high in inflation the growth rate of CPI average in
Vietnam is forecasted to decrease from 7.7% in 2013 to 4.5% in 2016. Vinamilk
purchased nearly 90% of total fresh milk material from domestic for Vinamilk’s
production fro, so with the growth in CPI decrease, it is hoped that the cost for fresh
material will increase slightly in the future.
As can be seen, the cost of fresh material of Vinamilk had the high growth rate in price
34.86% due to high CPI in 2011, the food for cow milk increase significantly. In 2012
because the CPI ratio went down and the Vinamilk cooperate with the household
breeding dairy cattle to support them in breeding cow and breeding technique and
facilities so that the quantity of output increased that lead the ratio reduced to 2.4%
Table 28: Purchasing price of domestic fresh milk material per liter
Purchasing price of
fresh material
2010
2011
2012
7,980
10,762
11,021
34.86
2.4
%change
Source: Vinamilk
The new demand for dairy products in global is expected climbed higher than the rise in
new supply due to the high demand on developing country, especially Asia and the rise in
population. Besides, the main milk exporter experience the poor climate currently and the
decrease in productivity of cow milk, so it is affect significantly to the rise in price of
milk products in the world. The price of whole milk powder and skim milk powder is
increase from the mid-year of 2012 up to now and it is expected to increase in the next
few years. Most of powder milk material of Vinamilk is imported from foreign country,
so it is affected heavily on the cost of goods sold.
88
Figure 18: The global Milk Price
(Sources: USDA)

The Vietnam sugar price in 2013 declined due to the big amount of stock
inventory, up to the February, 2013 the amount of sugar in stock was 322,250
tons. The reason for this problem is the smuggling on sugar market and the
consumption is lower. Therefore, with the surplus on the supply, it is expected
that the sugar price will reduce in the next few years.
Figure 19: Sugar production and consumption
(Source: Vietnam sugar report)
89
 Liquid milk
Liquid milk including Pasteurized/UHT long life milk has the main ingredient is fresh
milk material. Currently, the price of UTH milk in the market is about 29,500 VND per
liter, compare this price with the fresh milk material 11,201VND per liter, it is seen that
the price is nearly 3 times of fresh material. Combining with some nutrient that Vinamilk
add on their liquid milk and the expense for packaging, producing products, the
assumption in cost of goods sold for this segment equal about a haft of sales. The cost of
goods sold in 2013 and 2014 is predicted at 52% of sales. In later year, along with the
expected cost for purchasing fresh milk go up slightly due to the forecasted declining in
CPI growth and breeding activities of Vinamilk is improved significantly, with 28,000
cow milk in 2016 compare 8,200 head currently, the prediction of the growth rate for cost
of good of liquid milk is 50% for the later years as follow:
Table 29: Forecast percentage cost of liquid milk on liquid milk sales
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
52%
52%
50%
50%
50%
50%
50%
50%
Cost of liquid
milk ( % liquid
milk on sales)
Cost of liquid milk
Mil VND
2013f
6,187,784.28
2014f
8,044,119.56
2015f
10,055,149.45
2016f
13,071,694.29
2017f
16,470,334.80
2018f
20,093,808.46
2019f
23,710,693.98
2020f
27,030,191.14
90
 Powder milk
Powder milk is the segment that forecast to have the high growth rate in cost of goods
sold due to the unexpectation of the significant increase in global dairy price that is
analyze above. Besides, the price for some Vinamilk’s powder milk products currently:
Table 30: Price of Vinamilk’s powder milk
Dielac alpha ( 900g)
208,500VND
Dielac Pedia (900g)
327,000 VND
Vianmilk sure prevent (400g)
185,000 VND
Dielac mama ( 900g)
146,000 VND
Sources: vatgia.com
Moreover, the price of whole milk products is $5.146 per kg equal VND 110,000 per
kilogram. However, powder milk is the products that is added many nutrition ingredients
on its. Therefore, alongside with the variety of price of powder milk products and the rise
in cost for raw material, it is assumed that the average of cost of powder milk is 68% of
powder milk’s sale in which the cost of goods sold in 2013 and 2014 for powder milk
products cover 71% and 70% of powder milk’s revenue, respectively of sales due to
currently the global milk price increase significantly, and in later year, it is hoped that the
global price is more stable and the portion that Vinamilk import form Miraka company- a
subsidiary of Vinamilk in New Zealand increase, the ratio will move with the downward
trend as follow in the table:
Table 31: Forecast percentage cost of powder milk on powder milk sales
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
71%
70%
69%
68%
68%
67%
67%
67%
Cost of powder
milk ( % of
powder milk’s
sales)
91
Cost of powder milk
(mil VND)
2013f
7,055,046.23
2014f
9,042,383.20
2015f
11,587,168.18
2016f
14,845,009.67
2017f
18,853,162.29
2018f
23,034,128.27
2019f
27,871,295.21
2020f
32,888,128.35
 Yogurt
Yogurt is mainly made from fresh milk and powder milk. Depending on the price of
those material that is analyzed above, the costs for this product is forecasted account for
62% of yogurt sales in the first three years from 2013 to 2015. In later years, the material
that is supplied by their own dairy farm go up and other sources material from supplier is
more stable, the assumption for the ratio cost of yogurt will decline by 1 percent each
year up to 2020.
Table 32: Forecast percentage cost of yogurt on yogurt‘s sales
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
62%
62%
62%
61%
60%
59%
58%
57%
Cost of yogurt
(% of yogurt
sales)
92
Cost of yogurt
Mil VND
2013f
3,555,479.17
2014f
4,515,458.55
2015f
5,734,632.36
2016f
6,996,251.48
2017f
8,326,686.18
2018f
9,661,731.53
2019f
10,922,669.38
2020f
12,022,469.19
 Condense milk
Condense milk is mostly made by the powder milk and sugar. Therefore, the opposite
trend of the cost for powder milk and sugar in the ingredient, it is hope that its segment
has the average cost nearly 61% of condense milk sale.
Table 33: Forecast percentage cost of condense milk on condense milk sales
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
63%
63%
62%
61%
61%
60%
60%
60%
cost of condense milk
(% of condense milk
sales)
Cost of condense milk
Mil VND
2013f
3,243,008.82
2014f
3,664,599.96
2015f
4,039,203.51
2016f
4,411,201.13
2017f
4,852,321.24
2018f
5,202,324.74
2019f
5,618,510.72
2020f
6,011,806.47
93
 Other products
Other products are not the strength segment of Vinamilk, its cost also fluctuate through
the time. Therefore, it is hope that the cost of goods sold for this segments take up 62%
on average of its sales.
Table 34: Forecast percentage cost of others products on others product sales
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
62%
62%
62%
62%
62%
62%
62%
62%
Cost of others
product ( % of
others product sales)
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
368887.14
405775.85
438237.92
464532.2
487758.8
512146.75
537754.08
564641.79
Cost of
others
product
All in all, the cost of goods sold for each segment is summed up to get the cost of goods
sold for all products of Vianmilk. After that, we can calculate the percentage cost of
goods sold on net sales every year as follow:
Table 35: Forecast percentage total cost of goods sold on total net sales
Forecast Total cost of
Forecast total net
% cost of goods sold
goods sold
sales
in sales
2013f
20,410,205.64
33313526.11
61.3%
2014f
25,672,337.13
42141451.16
60.9%
2015f
31,854,391.43
53374383.04
59.7%
2016f
39,788,688.76
67424272.61
59.0%
2017f
48,990,263.32
83285051.31
58.8%
2018f
58,504,139.76
100439313.4
58.2%
94
2019f
68,660,923.38
118084054.5
58.1%
2020f
78,517,236.9
135169582.2
58.1%
Vinamilk is managing efficiency the energy in production. Vinamilk move to use the
safety, clean energy by reducing the amount of FO oil and increasing the using of
compressed natural gas and biomass. Up to now, Vinamilk has 7 factories using this
renewable energy and in the future Vinamilk will apply this system to all factories. By
using this energy, Vinamilk can save the money because it is used the waste of
agriculture products to make energy. Vinamilk expect to be self-sufficient the fresh milkmaterial for their production to reduce the pressure in price of their resources and will get
the stable sources of powder milk material from Mikara factories in New Zealand, so the
Cost of goods sold in revenue have the tendency go down slightly. All in all, it is
assumed that the cost of goods sold will be 57% of sales per annum in the future.
 Forecasting some financial variable in income statement
Vinamilk work on food producer, so all of the expenditure and others account is
related closely to the net sale. Therefore, the growth rate of others account on
income statement is assumed depending on the level of revenue.

Financial income:
It is the amount that company using their capital to invest in many financial
activities such as made loan, deposit money at banks, invest in security and so on.
As can be discussed in common size income statement analysis, the percentage of
financial income on sales is quite stable at about 3%, except in 2009 and 2012. In
2009, Vinamilk received big amount of money from liquidation of all share of
SAB Miller joint venture, so the portion in sales is 4%. In 2012, this level
reduces to 2% as the result of economic downturn. Additionally, the interest rate
currently has the tendency to be lower and lower so, it is forecast that in the
future, the financial income of Vinamilk will take up 2% of total sales
95
Table 36: Forecast financial income
Financial income
2008
2009
2010
2011
2012
% of sales
3%
4%
3%
3%
2%

Forecast rate
( % of sales)
2%
Financial expense:
Financial expense is the amount of money companies have to pay for interest
expense, the loss in exchange rate and others fee for financial activities. The financial
expense occupied the very small portion of sales because Vinamilk strongly finance on
equity and just borrow some little amount of money at foreign banks in dollar to pay for
supplier. In 2012, thanks to the exchange rate fluctuate slightly compare with others year,
so the loss in exchange rate reduced. However, because the exchange rate expected
fluctuate on every year, so the three year average percentage of financial expense on sales
is used as the key assumption for financial expense
Table 37: Forecast financial expense
Financial expense
( mill VND)
% of sales

2010
2011
2012
153,199
246,430
51,171
0.97%
1.14%
0.19%
Forecast rate
(percentage of sales )
0.77%
Interest expense:
In this assumption, the interest expense is also measured depending on sale instead of
rely on debt because Vinamilk just borrowed some amount of money from foreign bank
to pay for foreign supplier and pay back all debt during the year, so at the end of the
accounting fiscal year there are no debt in the financial statement. Thus, it is forecasted as
the 3-year average percentage change on sales.
96
Table 38: Forecast interest expense
Interest expense
( mill VND)
% of sales

2010
2011
2012
6,172
13,933
3,115
0.04%
0.06%
0.01%
Forecast rate
(percentage of sales )
0.04%
Selling, general and administrative expense
Selling, general and administrative expense is the expenditure for advertising
activities, commission for agency and others offices expense. In recent year, as can be
seen on the table below, Vinamilk tried to control and save the money from those
spending, with the portion on sales decreased from 16.4% in 2008 to 10.8% in 2011 and
2012. However, the marketing expense will expected higher and higher in the future.
Additionally, when the market is saturated, the marketing and advertising campaign is
very importance to build the customer awareness and loyalty. Therefore, it is predicted
that the percentage of S, G and A expense is at 11.5% of sales.
Table 39: Forecast selling, general and administrative expense
2008
2009
2010
2011
2012
1350112
1538418
1826333
2271346
2870986
16.4%
14.5%
11.6%
10.5%
10.8%
Forecast rate
(percentage of sales )
S,G and A
expense
(mill VND)
% of sales

11.5%
Profit from other activities:
The profit from others activity of Vinamilk is quite stable every year at more than
1%, except in 2010 the ratio is 3.9% due to the selling of Sai Gon coffee factory for
Trung Nguyen, Vinamilk received the big amount of money from this activities.
97
Therefore, it is assumed that in the future the proportion of profit from other activities of
Vinamilk on sales will be the same with the level in 2011 and 2012, at 1.1%
Table 40: Forecast Profit from other activities
Forecast rate
2008
2009
2010
2011
2012
(percentage of
sales )
Profit from other
activities
% of sales

130,173
135,959
608,786
237,226
287,317
1.6%
1.3%
3.9%
1.1%
1.1%
1.1%
Dividend:
Dividend is the amount of money Vinamilk paid out to shareholder as the percentage
of net income. The dividend paid is changing every year, in 2010 the dividend payout
ratio is high because the dividend of second period 2009 is paid in 2010 and in this year
Vinamilk also paid the additional dividend for six years changing to Joint Stock
Company.
In 2011, the dividend payout ratio is lower than others year because the
dividend for final period 2011 is paid in 2012 Because the amount fluctuated every year,
so the 3 year average of dividend payout ratio is used as the forecasted rate for dividend.
Table 41: Forecast Dividend paid
Dividend payout
ratio
2010
2011
2012
Forecast rate( % of net income)
48.8%
17.6%
38.2%
34.9%
The table below summary the financial variable assumption for income statement:
98
Table 42: The financial variable assumption for income statement
Variables
Assumption
Net sales
Forecasted above
Cost of goods sold
Forecast above
Financial income
2% of sales
Financial expense
0.77% of net sales
Interest expense
0.04% of sales
Selling, general, and administrative
11.5% of net sales
expense
Net Profit from other activities
1.1% of net sales
Corporate income taxes
25% of net profit before tax
Dividend
34.9%
Table 43: Pro-forma Income Statement
PRO-FORMA INCOME STATEMENT
million VND
Net sales
Cost of goods
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
33,313,526
42,141,451
53,374,383
67,424,273
83,285,051
100,439,313
118,084,054
135,169,582
20,410,206
25,672,337
31,854,391
39,788,689
48,990,263
58,504,140
68,660,923
78,517,237
12,903,320
16,469,114
21,519,992
27,635,584
34,294,788
41,935,174
49,423,131
56,652,345
666,271
842,829
1,067,488
1,348,485
1,665,701
2,008,786
2,361,681
2,703,392
256,514
324,489
410,983
519,167
641,295
773,383
909,247
1,040,806
13,325
16,857
21,350
26,970
33,314
40,176
47,234
54,068
3,831,056
4,846,267
6,138,054
7,753,791
9,577,781
11,550,521
13,579,666
15,544,502
9,482,021
12,141,187
16,038,442
20,711,111
25,741,413
31,620,056
37,295,899
42,770,429
sold
Gross profit
Financial income
Financial
expenses
in which
financial expense
S, G and A
expenses
Operating
profit/(loss)
99
Profit/(loss) from
366,449
463,556
587,118
741,667
916,136
1,104,832
1,298,925
1,486,865
9,848,470
12,604,743
16,625,561
21,452,778
26,657,549
32,724,889
38,594,823
44,257,295
2,462,118
3,151,186
4,156,390
5,363,195
6,664,387
8,181,222
9,648,706
11,064,324
7,386,353
9,453,557
12,469,171
16,089,584
19,993,162
24,543,666
28,946,117
33,192,971
2,575,133
3,295,830
4,347,175
5,609,374
6,970,294
8,556,754
10,091,598
11,572,195
4,811,220
6,157,727
8,121,995
10,480,209
13,022,868
15,986,913
18,854,520
21,620,776
other activities
Net profit/(loss)
before tax
Corporate
income tax
Net profit/(loss)
after tax
Dividend
Retain earning
The pro-forma income statement reveal that Vinamilk will have the good
performance in the future, especially in 2017 with the forecasted net revenue more than
83 thousand billion VND , Vinamilk totally can get the target 3 billion on sales to be able
to become 50 biggest dairy enterprise in the world.

Forecast key variable for FCFF
The table below present details the technique for each account.

Forecast Fixed assets:
Table 44: Forecast fixed assets turnover
Forecast rate (
2008
2009
2010
2011
2012
5 -year
average fixed
asset turnover)
Net sales
8,208,982
10,613,771
15,752,866
21,627,429
26,561,574
Fixed assets
1,936,923
2,524,964
3,428,572
5,044,762
8,042,301
18
30.4
35.8
47.1
59.4
4.24
4.2
4.59
4.29
3.3
% change in
Fixed assets
Fixed assets
turnover
100
4.124
The fixed assets of Vinamilk is increase every year due to Vinamilk invest significantly
on building plant, invest in cow herd and equipped high technology in production
process. From 2008 to 2010, Vinamilk also invested to expanding factories and breeding
activities, but in 2011 and 2012, Vinamilk built 3 new factories in which 2 factories are
the biggest factories in Asia, so the growth rate on fixed assets increased considerably.
Therefore, although the sales increase significantly every year, it is can see that the fixed
assets turnover of Vinamilk decrease. In the future years, Vinamilk still invests in
expanding factories and herd, but the growth in fixed assets is not high as the ratio in
2012. Thus, it is predicted that the fixed assets turnover in forecasted period is calculated
by taking the 5 – years average fixed assets turnover from 2008 to 2012
Table 45: Forecast fixed assets
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
4.124
4.124
4.124
4.124
4.124
4.124
4.124
4.124
33,313,526
42,141,451
53,374,383
67,424,273
83,285,051
100,439,313
8,077,965
10,218,587
12,942,382
16,349,242
20,195,211
24,354,829
Forecast
net
fixed
asset
turn
over
Net
sales
118,084,05
4
135,169,582
Net
Fixed
28,633,379
32,776,329
assets

Forecast depreciation:
As can be seen the depreciation expense to fixed asset decrease every year. The reason
for this reduction is Vinamilk has invested strongly on building three new factories in
2011 up to now, and others activities in expanding capacity and herd cow. Therefore, the
5 years average depreciation expense to net fixed assets is used to compute the
depreciation expense.
101
Table 46: Depreciation expense to net fixed assets
Depreciatio
2008
2009
2010
2011
2012
178,430
234,078
290,131
414,590
535,452
1,936,923
2,524,964
3,428,572
5,044,762
8,042,301
9.21%
9.27%
8.46%
8.22%
6.66%
Forecasted rate ( %
of Net Fixed assets)
n expense
Net Fixed
assets
Depreciatio
n expense to
8.36%
net fixed
assets
Table 47: Depreciation expenses
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
8.36%
8.36%
8.36%
8.36%
8.36%
8.36%
8.36%
8.36%
8,077,965
10,218,587
12,942,382
16,349,242
20,195,211
24,354,829
28,633,379
32,776,329
675,318
854,274
1,081,983
1,366,797
1,688,320
2,036,064
2,393,750
2,740,101
Depreciati
on expense
to net fixed
assets
Net fixed
assets (mil
VND)
Depreciati
on expense
(mil VND)

Forecast Fixed capital investment:
It is the investment on properties, plants and equipment. It is computed by taking the
subtraction of net fixed assets at the end of year to the net fixed assets at beginning of the
year and then plus depreciation expense on that year.
102
Table 48: Forecast Fixed capital investment
Mil VND
Net fixed
assets
2012
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
8,042,301
8,077,965
10,218,587
12,942,382
16,349,242
20,195,211
24,354,829
28,633,379
32,776,329
675,318
854,274
1,081,983
1,366,797
1,688,320
2,036,064
2,393,750
2,740,101
710,982
2,994,896
3,805,778
4,773,657
5,534,289
6,195,682
6,672,300
6,883,051
Depreciation
expense
Fixed capital
investment

Forecast Account receivable:
Account receivable is turnover measure how quickly the firm can collect their sales on
account. Therefore, the receivable increased, which means that the firms can collect their
sales on credit faster and vice versa. As can be seen, the account receivable of Vinamilk
fluctuated year after year. Besides, Vinamilk had the strategy to collect the money sales
on credit slower due to attract customers, so the receivable turnover in the future is
computed by taking the 3-year average receivable turnover.
Table 49: Forecast Account receivable turnover
Forecasted
rate( 3-year
2008
2009
2010
2011
2012
average
receivable
turnover)
Net sales
Account
receivable
8,208,982
10,613,771
15,752,866
21,627,429
26,561,574
646,385
728,635
1,124,862
2,169,205
2,246,363
12.70
14.57
14.00
9.97
11.82
Account
receivable
turnover
103
11.93
Table 50: Forecast Account receivable
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
11.93
11.93
11.93
11.93
11.93
11.93
11.93
11.93
33,313,526
42,141,451
53,374,383
67,424,273
83,285,051
100,439,313
118,084,054
135,169,582
2,792,416
3,532,393
4,473,963
5,651,657
6,981,144
8,419,054
9,898,077
11,330,225
Forecast
Account
receivable
turn over
Net sales
Account
receivable
( Mill
VND)

Forecast Inventory
Vinamilk inventory turnover of Vinamilk is nearly unchanged so much from 2009 to
2012, so the inventory turnover in the future is computed by taking the 3-year average
inventory turnover.
Table 51: Forecast Inventory turnover
Forecasted rate( 32008
2009
2010
2011
2012
year average
inventory turnover)
Cost of
goods
5,610,969
6,735,062
10,579,208
15,039,305
17,484,830
1,775,342
1,311,765
2,351,354
3,272,496
3,472,845
3.16
5.13
4.50
4.60
5.03
sold
Inventory
Inventory
turnover
104
4.71
Table 52: Forecast Inventory
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
4.71
4.71
4.71
4.71
4.71
4.71
4.71
4.71
20,410,206
25,672,337
31,854,391
39,788,689
48,990,263
58,504,140
68,660,923
78,517,237
4,333,377
5,450,602
6,763,140
8,447,705
10,401,330
12,421,261
14,577,691
16,670,326
Forecast
inventory
turn over
COGS
Inventory
( Mill
VND)

Forecast account payable:
The account payable of Vinamilk fluctuated during 2008 to 2012 and has the decreasing
trend in some year recently; it means that Vinamilk can take the advantage by keep the
money of supplier longer than previous year, so it is calculated by taking the 3-year
average account payable
Table 53: Forecast account payable turnover
Forecasted rate(
2008
2009
2010
2011
2012
3-year average
payable turnover)
Cost of goods
sold
Account payable
Account payable
turnover
5,610,969
6,735,062
10,579,208
15,039,305
17,484,830
492,556
789,867
1,089,417
1,830,959
2,247,659
11.39
8.53
9.71
8.21
7.78
105
8.57
Table 54: Forecast account payable
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
Forecast
Account
8.57
8.57
8.57
8.57
8.57
8.57
8.57
8.57
20,410,206
25,672,337
31,854,391
39,788,689
48,990,263
58,504,140
68,660,923
78,517,237
2,382,514
2,996,771
3,718,411
4,644,594
5,718,708
6,829,277
8,014,894
9,165,436
payable
turn over
COGS
Account
payable (
Mill VND)

Working capital investment
The working capital is calculated by taking the account receivable plus the inventory and
minus account payable. After that, computing the working capital investment by taking
the working capital at the end of the year minus the working capital at the beginning of
the year will have the working capital investment from 2013 to 2020.
Table 55: Working capital investment
Mil VND
Account
receivable
Inventory
Account
payable
working
capital
2012
2013F
2014F
2015f
2016f
2017f
2018f
2019f
2020f
2,246,363
2,792,416
3,532,393
4,473,963
5,651,657
6,981,144
8,419,054
9,898,077
11,330,225
3,472,845
4,333,377
5,450,602
6,763,140
8,447,705
10,401,330
12,421,261
14,577,691
16,670,326
2,247,659
2,382,514
2,996,771
3,718,411
4,644,594
5,718,708
6,829,277
8,014,894
9,165,436
3,471,549
4,743,279
5,986,225
7,518,692
9,454,768
11,663,766
14,011,038
16,460,874
18,835,115
1,271,730
1,242,946
1,532,468
1,936,076
2,208,998
2,347,272
2,449,836
2,374,241
working
capital
management
106
5.2 Valuation
In this valuation, the discount cash flow model based on free cash flow to firm is used to
measure the Vinamilk intrinsic value of stock price because Vinamilk had the stable
financing structure ( most use their owner equity)
Value of firm =
First step: The cost of capital is calculated by taking the weight average cost capital
(WACC).
Among them:
E: market value of Vianmilk’s equity
D: market value of Vinamilk’s debt
V= E+D
Re: cost of equity
Rd: cost of debt
Tc: tax rate

Capital structure:
o Market value of debt: Because on the balance sheet at the end of accounting fiscal
year, the item short-term and long-term debt is 0. The result of this situation is
that Vinamilk is no longer using long-term debt on their capital structure; they
just borrow some short-term loan with the 3 to 6 months maturity from the foreign
107
bank in US dollar to deal with the payment for oversea supplier and paid out all of
debt within the year, so the balance sheet at the end of accounting fiscal year,
there are no debt all both short-term and long-tem. Moreover, the WACC is care
most about long-term debt, so the market value of debt of Vinamilk is 0.
o Market value of equity: it is computed by using the number share outstanding of
Vinamilk at the end of 2012 multiply the stock’s price at the end of that year.
Thus, market value of equity: E= 833,525,676 * 88,000 = 73,350 billion VND.
Because WACC = (E/V)*Re + (D/V)*Rd *(1+tax rate), so with D=0 WACC= Re
 Cost of equity
Cost of equity is computed by using capital asset pricing model (CAPM model)
Re = Rf + beta (Rm – Rf )
Where:
o Rf: is the risk free rate
The yield rate of government bond with 10-year to maturity is used as the risk free
rate. The interest rate of 10-year bond maturity on local currency yield the latest losing is
9.3%%
that
is
record
in
the
Asian
bonds
online
website:
http://asianbondsonline.adb.org/vietnam.php
Therefore, Rf = 9.3%
o Beta measure the sensitivity of the return on VN-index and the return on
Vinamilk’s stock price every day through 5 year from Jan 1st, 2008 to Dec31 st,
2012. Beta is compute using the formula:
108
In which
VN index,
is the rate of return of Vinamilk stock price,
is the rate of return of
is the variance of VN index. Using the formula, the beta is
determined at 0.877.
o The market risk premium (Rm-Rf) that is used the assumption of Aswath
Damodaran in June 2012 on the website: http://pages.stern.nyu.edu/~adamodar/, with
the total equity risk premium at 13.3%
All in all, the cost of equity is calculated as follow: Re = 9.3% + 0.877* 13.3% = 20.97%
 WACC = Re = 20.97%
Because the Vinamilk strongly finance on owner’s equity and the financing structure of
Vinamilk is nearly the same each year, so this weight average cost of capital (WACC) at
the end of 2012 is calculated as the discount rate for these free cash flow of future year.
Second step: Calculate the Free cash flow to firm from 2013 to 2020:
Table 56: Calculate the Free cash flow to firm
Mill VND
2013F
2014F
2015f
2016f
2017f
2018f
2019f
2020f
Net income
7,386,353
9,453,557
12,469,171
16,089,584
19,993,162
24,543,666
28,946,117
33,192,971
675,318
854,274
1,081,983
1,366,797
1,688,320
2,036,064
2,393,750
2,740,101
13,325.4
16,856.6
21,349.8
26,969.7
33,314.0
40,175.7
47,233.6
54,067.8
710,982
2,994,896
3,805,778
4,773,657
5,534,289
6,195,682
6,672,300
6,883,051
1,271,730
1,242,946
1,532,468
1,936,076
2,208,998
2,347,272
2,449,836
2,374,241
6,092,284.09
6,086,845.95
8,234,257.76
10,773,617.24
13,971,507.94
18,076,952.16
22,264,965.97
26,729,847.58
Noncash
chargedepreciation
Interest
expense
Fixed
capital
investment
Working
capital
investment
Free cash
flow to
firm(FCFF)
109
Present
value at the
end
6,092,284.09
5,031,739.99
5,626,990.99
6,086,101.41
6,524,493.54
6,978,379.97
7,105,216.58
7,051,437.29
December
2013
Total PV
50,496,643.87
FCFF at the
end 2013

Terminal value
Due to the economy variation and the stabilization of dairy industry, I assumed that after
2020 the cash flow of company will expected have the stable growth rate forever. In this
case, 2020 is the terminal value, in which all of the future cash flow after 2020 is
discounted back to 2020.
Therefore, the terminal value is computed as follow:
Terminal value = FCFF2020 * (1+g) / (WACC – g)
Because the all of financial variable is forecasted depending as the percentage of sales or
related to sales, so the stable growth rate on net sales after 2020 is the constant growth
rate for free cash flow to firm. Thus, g=8.28%
Terminal value =
228,095,679.51
Million VND
Present value of terminal value at the end of 2013 =Terminal value / (1+ WACC) ^7
= 60172523.48 Million VND
Because, Now is the May, 2013. Therefore, the value of firm at the end of 2013 is
discount back to May, 2013 to get the accurate share price.
Firm value at May 2013 = Firm value at Dec 2013 / (1+WACC/12) ^7
110
Table 57: Valuation
VALUATION
Million VND
Present value of FCF(2013-2020) at the end Dec 2012
50,496,643.87
Present value of terminal value at the end Dec 2013
60172523.48
Firm value at Dec 2013
110,669,167.35
Firm value at May 2013
98030875.77
Market value of equity
98030875.77
Share outstanding
833,525,676
Price estimate
0.117610
Thus, the intrinsic value of Vinamilk stock price is 117,610VND. In comparison
with the market stock price of Vinamilk, it is slightly LOWER than the market stock
price of Vinamilk at the latest date 17th, May, 2013, at 125,000 VND. It is can be seen
that the market stock price of Vinamilk is OVER VALUE.
 SENSITIVITY ANALYSIS
The sensitivity analysis is the useful tool to determine the range of Vinamilk stock
price under the variation of Weight Average Cost of Capital (WACC) because the
fluctuation in market risk and the constant growth rate (g) is hard to project as the
unstable Vietnam’s economic and the changing price of global dairy industry as well (due
to Vinamilk import a large amount of raw powder milk). This analysis presents the
volatility of stock price in the changes of WACC at +/- 0.5% in the rage [19.97% ;
21.97%] and the fluctuation in constant growth rate of cash flow (g) at +/- 0.5% in the
rage [ 7.78% ; 8.78%]. The mean of distribution is the intrinsic value stock price
111
117,610VND. With the fluctuation around these range of WACC and constant Growth
rate, the net present value of FCFF, the present value of terminal value, the market value
of equity and the stock’s price change as below:
Unit: Mill VND
net present value of FCFF
(2013-2020)
NPV of Terminal value
WACC
7.78%
8.28%
8.78%
19.97%
46402377.54
58,863,625.6
61,666,069.8
64,718,955.9
20.47%
45554128.03
54,764,563.3
57,275,331.7
60,000,879.3
20.97%
44729985.24
51,043,440.2
53,300,890.5
55,743,544.7
21.47%
43924369.55
47,636,196.8
49,671,331.4
51,866,839.1
21.97%
43141428.12
44,527,264.4
46,367,644.0
48,347,552.1
Unit: mil VND
Firm value
Equity value
7.78%
8.28%
8.78%
7.78%
8.28%
8.78%
105,266,003.1
108,068,447.4
111,121,333.5
105,266,003.1
108,068,447.4
111,121,333.5
100,318,691.3
102,829,459.8
105,555,007.4
100,318,691.3
102,829,459.8
105,555,007.4
95,773,425.4
98,030,875.8
100,473,529.9
95,773,425.4
98,030,875.8
100,473,529.9
91,560,566.4
93,595,701.0
95,791,208.7
91,560,566.4
93,595,701.0
95,791,208.7
87,668,692.5
89,509,072.1
91,488,980.2
87,668,692.5
89,509,072.1
91,488,980.2
Stock price
7.78%
0.126290
0.120355
0.114902
0.109847
0.105178
8.28%
0.129652
0.123367
0.117610
0.112289
0.107386
112
8.78%
0.133315
0.126637
0.117610
0.114923
0.109761
The analysis reveals that the stock price will be changing in the range [105,178; 133,315]
VND. This is the risk analysis; the investor can be used as the reference to their
investment. In conclusion, the intrinsic value of Vinamilk stock price is assumed 117,610
VND, slightly lower than the market stock price of Vinamilk at the latest date 17th, May,
2013, at 125,000 VND. Thus, combining with the sensitivities analysis the market stock
price of Vinamilk is vary in the range of sensitivities analysis from 105,178 VND to
133,315 VND. Therefore, the investors use it as the additional information to consider
selling or keep Vinamilk stocks.
113
CHAPTER VI
CONCLUSION
Business analysis and valuation is very importance to analyze the firm. Following step
by step of business analysis and valuation, the industry that firm do the business is
analyzed to see the development of this industry and measure how efficient the strategy
that analyzed company used to compete with the others peers is appropriated. Besides,
the financial performance of this company is also evaluate to see the profitability of this
analyzed firm and determines how well the firm is managed to give the suitable strategy
for the firm in the future. Finally, the forecast and valuation process will be defined the
intrinsic value of company stock price. Thereby, the investors can depend on that
valuation to have the good choice.
Vietnam dairy products joint stock company (Vinamilk) is the leader in Vietnam dairy
industry and they has the appropriated strategy to maintain the market position and get
the high growth in the net sales by building the new factories to expanding the capacity,
invest strongly on material resources both in Domestic and foreign country, widen the
distribution channel to approach new customers, by doing that Vinamilk can save the cost
of goods sold and take the advantages of economic of scale. This thesis is use to
determine the intrinsic value of Vinamilk stock price to give the investor the additional
information when they invest in Vinamilk.
114
LIST OF REFERENCES
1. Palepu, K., Healy, P., & Bernard, V. Business analysis and valuation: Using financial
statement. (3rd ed.).
2. Damodaran, A. Damodaran on valuation. (2nd ed.). New Jersey: John Wiley & Sons.
DOI: www.WileyFinance.com.
3. Pearce, J. A., & Robinson, R. B. Strategic management formulation, implementation
and control. (11th ed.).
4. FAO. (November 2012). Food outlook. Milk and Milk products, 57-61. doi: ISSN
0251-1959
5. Euromonitor International. (March 2013). Yoghurt and sour milk products in Vietnam.
3,7. Retrieved from http://www.euromonitor.com/vietnam/country-factfile
6. Business Monitor international. (Q2 2013). Vietnam agribusiness report. Dairy
outlook, 13-20. doi: ISSN 1759-1740
7. Business Monitor international. (Q2 2013). Vietnam food & drink report. Dairy, 24-25.
doi: ISSN 1749-3072
8. Euromonitor International. (March 2013). Packaged food in vietnam. Retrieved from
http://www.euromonitor.com/vietnam/country-factfile
9. Euromonitor International. (October 2011). Drinking milk products in Vietnam.
Retrieved from http://www.euromonitor.com/vietnam/country-factfile
115
10. Euromonitor International. (March 25th 2011). Colossal growth in the vietnamese
dairy industry. Retrieved from http://www.euromonitor.com/vietnam/country-factfile
11. Euromonitor International. (October 2011). Baby food in Vietnam. Retrieved from
http://www.euromonitor.com/vietnam/country-factfile
12. KANTAR WORLDPANEL. (2013). Kantar worldpanel dairy talk. Retrieved from
http://www.kantarworldpanel.com
13. Financial statement (2008-2012), http://www.vinamilk.com.vn/
14. Võ Trọng Thành. (2012, 11 12). Khái quát triển vọng sản xuất sữa toàn cầu
năm 2012. Retrieved from
http://vietnamdairy.org.vn/vi/publications.php?type=1&mnu=5&nid=143
15. Báo cáo thỊ trưỜng sỮa 10 tháng năm 2012 & dỰ báo năm 2013. (2012, 10).
Retrieved from http://congthuongninhbinh.gov.vn/gpmaster.grandprix-media.so-congthuong-ninh-binh.gplist.55.gpopen.2597.gpside.1.asmx
16. Hoàng Thị Thiên Hương. (2012, 11 20). TỔng quan vỀ ngÀnh sỮa thẾ giỚi niÊn vỤ
2012-13 . Retrieved from http://vietnamdairy.org.vn/vi/news.php?nid=1284
17. Tống Xuân Chinh. (2012, 12). BÁo cÁo về sản xuất và thị trường sữa tháng
12/2012. Retrieved from
http://vietnamdairy.org.vn/vi/files/2013013010480310. BC T12.pdf
116
APPENDICES
 Forecast other variable for balance sheet:

Forecast cash and cash equivalent:
The increase or decrease cast and cash equivalent is measure by free cash flow to firm
minus the dividend paid for shareholders (because Vinamilk do not finance by debts).
After that this result is added up with the cash and cash equivalent at the beginning of the
year to get the cash and cash equivalent at the end of that year.
Table 58: Forecast Cash and cash equivalent:
MIL VND
2012
2013F
2014F
2015f
2016f
2017f
2018f
2019f
2020f
FCFF
6092284.093
6086845.948
8234257.763
10773617.24
13971507.94
18076952.16
22264965.97
26729847.58
Dividend
2575132.844
3295830.436
4347175.43
5609374.108
6970293.711
8556753.925
10091597.55
11572194.61
3,517,151.25
2,791,015.51
3,887,082.33
5,164,243.13
7,001,214.23
9,520,198.23
12,173,368.42
15,157,652.97
4,769,271.41
7,560,286.92
11,447,369.26
16,611,612.39
23,612,826.62
33,133,024.85
45,306,393.27
60,464,046.24
Paid
Net
(decrease)
/ increase in
cash and
cash
equivalents
cash and
cash
1,252,120
equivalent

Forecast short-term financial investment:
The financial short-term investment over sales fluctuated during 2008 to 2012, so
the 3 year average short-term assets is used to measure shorter financial
investment.
Table 59: Forecast short-term financial investment
117
Forecast rate ( 3-year
2008
2009
2010
2011
2012
short-term financial
investment to sales
Short-term
0.05
financial
0.22
0.11
0.03
0.15
0.10
investment/ sales
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
0.10
0.10
0.10
0.10
0.10
0.10
0.10
0.10
3,240,405
4,099,096
5,191,723
6,558,355
8,101,132
9,769,726
11,486,029
13,147,937
Short-term
financial
nvestment/ sales
Short-term
financial
investment

Forecast others current assets:
The others current assets in 3 recent year account for 1% of sales, so it is predicted that
the ratio will maintain this level in the future.
Table 60: Forecast others current assets
2008
2009
2010
2011
2012
Forecasted rate
0.01
0.03
0.01
0.01
0.01
0.01
Others
current
asset to
sale
Others current
asset to sale
Others current
assets (mil VND)
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
333,135
421,415
533,744
674,243
832,851
1,004,393
1,180,841
1,351,696
118
The current asset is equal the cash and cash equivalent plus short-term financial
investment, account receivable, inventory and other current assets, so current asset is
Table 61: Forecast Current asset
million VND
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
15,468,605
21,063,793
28,409,940
37,943,572
49,929,283
64,747,459
82,449,030
102,964,230
4,769,271
7,560,287
11,447,369
16,611,612
23,612,827
33,133,025
45,306,393
60,464,046
2,792,416
3,532,393
4,473,963
5,651,657
6,981,144
8,419,054
9,898,077
11,330,225
4,333,377
5,450,602
6,763,140
8,447,705
10,401,330
12,421,261
14,577,691
16,670,326
3,240,405
4,099,096
5,191,723
6,558,355
8,101,132
9,769,726
11,486,029
13,147,937
333,135
421,415
533,744
674,243
832,851
1,004,393
1,180,841
1,351,696
A. Current
assets
cash and cash
equivalent
account
receivable
inventory
Short-term
Financial
investment
other-current
assets

Long term receivable in 2 year recently is 0, so it is hoped that it will keep 0 for
the forecast periods

Net Investment properties:
As can be seen from 2010 up to now the investment in property nearly unchanged
because the real estate market is frozen , so it is expected that the properties
investment will keep the same amount in 2012 in three year later, after that when
the real estate market get the bottom, it is expected it will busy again. Thus, the
prediction for properties investment after 2015 will go up at 5% per annum.
119
Table 62: Forecast Net Investment properties
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
0%
0%
0%
5%
5%
5%
5%
5%
96,714
96,714
96,714
101,550
106,628
111,959
117,557
123,435
Percentage
change in
Net
investment
properties
Net
investment
properties

Long-term financial investment:
Vinamilk in recent year decreased the amount of long-term financial investment;
it is assumed that the long-term financial investment to sales in the forecast period
will be calculated as 2 –year average long-term financial investment to sales, at
2%.
Table 63: Forecast Long-term financial investment
Long term financial
investment to sales
Forecast
2008
2009
2010
2011
2012
0.07
0.06
0.07
0.04
0.01
0.02
rate
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
830,477
1,050,550
1,330,577
1,680,829
2,076,225
2,503,865
2,943,734
3,369,661
Long term
financial
investment
(mil VND)
120

Others long-term assets
The other long-term assets is forecast depending on the 3 year average others long-term
assets to sales
Table 64: Forecast others long-term assets
Others long-term
assets to sales
Others Long term
assets to sales
Others Long term
assets

2008
2009
2010
2011
2012
0.03
0.02
0.01
0.005
0.01
Forecast
rate
0.007
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
0.007
0.007
0.007
0.007
0.007
0.007
0.007
0.007
232,408
293,995
372,361
470,378
581,029
700,704
823,801
942,996
Forecast good will: it is expected that in the forecast period Vinamilk will
maintain the leader position in dairy industry, so it is expected that the goodwill
will be the same 2012

Forecast long- term assets
Table 65: Forecast long- term assets
Mil VND
Long-term
assets
Fixed assets
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
9,251,227
11,673,508
14,755,696
18,615,661
22,972,755
27,685,019
32,532,132
37,226,083
8,077,965
10,218,587
12,942,382
16,349,242
20,195,211
24,354,829
28,633,379
32,776,329
96,714
96,714
96,714
101,550
106,628
111,959
117,557
123,435
830,477
1,050,550
1,330,577
1,680,829
2,076,225
2,503,865
2,943,734
3,369,661
net
investment
in properties
long-term
financial
investment
121
good will
others long
term assets

13,662
13,662
13,662
13,662
13,662
13,662
13,662
13,662
232,408
293,995
372,361
470,378
581,029
700,704
823,801
942,996
Total assets
million VND
2013f
2014f
2015f
25,020,909
33,419,242
2016f
2017f
2018f
58,332,915
75,428,426
2019f
2020f
TOTAL
ASSETS

44,329,958
95,866,607
119,482,500
145,913,274
Forecast short-term debt:
2 year recently, the short-term debt account on the balance sheet at the end of
fiscal accounting year is 0. Therefore, it is predicted that the short-term debt
account is 0 in the forecast period.

Forecast other current liabilities:
Because others current liabilities is the accrued expense, taxes payable and
employees’ salaries payable, and so on. Therefore, it is assumed base on the
percentage of sales by taking the 3 year average others liabilities to sales.
Table 66: Forecast other current liabilities
Others currents
liabilities to sales
Others currents
liabilities to sales
Others currents
liabilities
2008
2009
2010
2011
2012
0.04
0.09
0.06
0.05
0.07
Forecast
rate
0.06
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
0.06
0.06
0.06
0.06
0.06
0.06
0.06
0.06
2,062,203
2,608,677
3,304,028
4,173,757
5,155,585
6,217,483
7,309,744
8,367,387
122

Current liabilities = short-term debt+ account payable + others current liabilities=
account payable + others current liabilities (short term debt = 0)
Table 67: Forecast current liabilities
Account
payable
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2,382,514
2,996,771
3,718,411
4,644,594
5,718,708
6,829,277
8,014,894
9,165,436
2,062,203
2,608,677
3,304,028
4,173,757
5,155,585
6,217,483
7,309,744
8,367,387
4,444,718
5,605,448
7,022,440
8,818,351
10,874,293
13,046,760
15,324,637
17,532,823
Others
current
liabilities
Current
liabilities

Because the capital structure of Vinamilk is nearly 80% owner’s equity and 20%
liabilities
Therefore we have the pro-forma balance sheet as follow:
Table 68: Pro-forma balance sheet
PRO-FORMA BALANCE SHEET
million VND
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
TOTAL
24,719,831
32,737,302
43,165,636
56,559,233
72,902,038
92,432,478
114,981,162
140,190,313
15,468,605
21,063,793
28,409,940
37,943,572
49,929,283
64,747,459
82,449,030
102,964,230
4,769,271
7,560,287
11,447,369
16,611,612
23,612,827
33,133,025
45,306,393
60,464,046
2,792,416
3,532,393
4,473,963
5,651,657
6,981,144
8,419,054
9,898,077
11,330,225
4,333,377
5,450,602
6,763,140
8,447,705
10,401,330
12,421,261
14,577,691
16,670,326
3,240,405
4,099,096
5,191,723
6,558,355
8,101,132
9,769,726
11,486,029
13,147,937
ASSETS
A. Current
assets
cash and
cash
equivalent
account
receivable
inventory
Short-term
Financial
investment
123
other333,135
421,415
533,744
674,243
832,851
1,004,393
1,180,841
1,351,696
9,251,227
11,673,508
14,755,696
18,615,661
22,972,755
27,685,019
32,532,132
37,226,083
8,077,965
10,218,587
12,942,382
16,349,242
20,195,211
24,354,829
28,633,379
32,776,329
96,714
96,714
96,714
101,550
106,628
111,959
117,557
123,435
830,477
1,050,550
1,330,577
1,680,829
2,076,225
2,503,865
2,943,734
3,369,661
13,662
13,662
13,662
13,662
13,662
13,662
13,662
13,662
232,408
293,995
372,361
470,378
581,029
700,704
823,801
942,996
A. Liabilities
4,943,966
6,547,460
8,633,127
11,311,847
14,580,408
18,486,496
22,996,232
28,038,063
I. Current
4,444,718
5,605,448
7,022,440
8,818,351
10,874,293
13,046,760
15,324,637
17,532,823
2,382,514
2,996,771
3,718,411
4,644,594
5,718,708
6,829,277
8,014,894
9,165,436
2,062,203
2,608,677
3,304,028
4,173,757
5,155,585
6,217,483
7,309,744
8,367,387
499,249
942,012
1,610,687
2,493,496
3,706,115
5,439,735
7,671,595
10,505,239
19,775,865
26,189,841
34,532,509
45,247,386
58,321,630
73,945,982
91,984,930
112,152,251
24,719,831
32,737,302
43,165,636
56,559,233
72,902,038
92,432,478
114,981,162
140,190,313
current
assets
B. Longterm assets
Fixed assets
Investment
in properties
long-term
financial
investment
good will
others long
term assets
liabilities
2.account
payable
3. other
short-term
liabilities
II .Long
term
liabilities
B. owners’
Equity
TOTAL
EQUITIES
AND
OWNER'S
EQUITY
124
 BETA CALCULATION:
DATE
VNM
VNINDEX
Return-VNM
28/12/2012
27/12/2012
26/12/2012
25/12/2012
24/12/2012
21/12/2012
20/12/2012
19/12/2012
18/12/2012
17/12/2012
14/12/2012
13/12/2012
12/12/2012
11/12/2012
10/12/2012
7/12/2012
6/12/2012
5/12/2012
4/12/2012
3/12/2012
30/11/2012
29/11/2012
88
88
88
85
83.5
83
84
84.5
124
125
128
127
127
128
130
130
130
131
130
129
129
129
413.73
409.97
406.1
401.34
399.71
396.78
399.68
398.59
393.39
393.63
392.21
391.19
391.08
389.37
386.69
383.8
385.69
385.69
382.1
379.27
377.82
378.2
0
0
0.035294118
0.017964072
0.006024096
-0.011904762
-0.00591716
-0.318548387
-0.008
-0.0234375
0.007874016
0
-0.0078125
-0.015384615
0
0
-0.007633588
0.007692308
0.007751938
0
0
0.0078125
ReturnVNINDEX
0.009171403
0.009529672
0.011860268
0.004077957
0.007384445
-0.007255805
0.00273464
0.013218435
-0.00060971
0.003620509
0.002607429
0.000281272
0.00439171
0.006930616
0.007529964
-0.004900309
0
0.009395446
0.007461703
0.003837806
-0.001004759
0.006413156
……………………………………………………….
21/02/2006
20/02/2006
17/02/2006
16/02/2006
15/02/2006
14/02/2006
13/02/2006
63
60
57.5
55
54.5
55
55
366.46
353.96
339.83
331.06
327.67
325.59
324.46
125
0.05
0.043478261
0.045454545
0.009174312
-0.009090909
0
0
0.035314725
0.041579613
0.026490666
0.010345775
0.006388403
0.00348271
-0.002183473
10/2/2006
9/2/2006
8/2/2006
7/2/2006
6/2/2006
27/01/2006
26/01/2006
25/01/2006
24/01/2006
23/01/2006
20/01/2006
19/01/2006
AVE
VAR
STDEV
COVAR
BETA
55
55
55
54
53
53
53.5
53
52
52.5
54
53
325.17
325.54
325
318.95
313.14
312.32
313.3
310.86
306.84
308.31
313.38
310.52
126
0
0
0.018518519
0.018867925
0
-0.009345794
0.009433962
0.019230769
-0.00952381
-0.027777778
0.018867925
-0.001136573
0.001661538
0.01896849
0.018554001
0.002625512
-0.003127992
0.007849193
0.013101291
-0.004767928
-0.016178442
0.009210357
0.00072242
0.000762111
0.02760635
0.000329211
0.000327287
0.018091082
0.000287317
0.877