Lecturer: Tran Thi Hoang Vi
Contributors
Nguyen Thi Ngoc Tram
Nguyen Xuan Truong
Nguyen Cam Tu
Nguyen Thi Phuong Thanh
Contents
Q&A
Answering questions of
lecturer and classmates
Common-size Analysis
Activity Ratios
Liquidity Ratios
Solvency Ratios
Profitability Ratios
Dupont Analysis
Financial Statements Analysis
Company Introduction
Introduction
Establishing history
Nature of business
Organization
Revenue/ Net income/Total
Equity
Introduce peer company
In comparison with other listed
pharmaceutical companies
Company name: DHG Pharmaceutical Joint-Stock Company
Abbreviation:
DHG PHARMA
Headquarters:
288 Bis Nguyen Van Cu, An Hoa Ward, Ninh Kieu
District, Cantho City
Vision:
“For a more beautiful and healthier life”
Mission:
DHG Pharma always provides high quality products and
services to satisfy the aspiration for a more beautiful and
healthier life
Website:
http://www.dhgpharma.com.vn
Chartered capital: 653,764,290,000 VND
Establishment
Precursor of DHG Pharmaceutical Joint-Stock Company was 2/9 Pharmaceutical
Factory and was founded on 02 September 1974 at Kenh 5 Dat Set, Khanh Lam
Commune, U Minh District, Ca Mau Province
The 2/9 Pharmaceutical Factory
was assigned to be under the
management of Hau Giang Health
Service
People’s Committee of Hau Giang
Province decided to merge the
Material Medical Supply Company
into Hau Giang Pharmaceutical
United Factory
Hau Giang Pharmaceutical United
Factory was founded basing on the
consolidation of 3 units: Stateowned Pharmaceutical Factory,
Level 2 Pharmaceutical Company
and Herbal Medicine Station
Hau Giang Pharmaceutical United
Factory was equitized to become
DHG Pharmaceutical Joint-Stock
Company
Mrs. Pham Thi Viet Nga
Chairperson of DHG Pharma and Vinh Hao Algae JSC
PhD of Business Administration
BSc Pharmacy
 Leading DHG Pharma to the best pharmaceutical brand in
Vietnam with an increase of 4.5 times in revenue and 7.5
times in profit after 7 years equitization
 Awarded one of Top 50 businesswoman of Asia in 2013 by
FORBES Magazine
Leading position
in Vietnam pharmaceutical industry
for
17 successive years
since 1996
12 invested brands
account for over
50% of the sales of the whole company
60%
Growth Rate
57%
50%
46%
40%
30%
26%
25%
20%
19%
20%
17%
18%
16%
16%
18%
21%
11%
10%
5%
0%
2006
2007
DHG
2008
2009
2010
2011
Domestically produced medicines market
2012
31-Dec-09
31-Dec-10
31-Dec-11
31-Dec-12
ASSETS
I. Current Assets
79.66%
79.24%
74.69%
76.43%
1. Cash and cash equivalent
38.38%
35.31%
23.40%
30.23%
1.05%
0.00%
0.00%
0.00%
3. Accounts receivable
19.51%
24.52%
24.55%
24.15%
4. Inventories
20.15%
19.07%
25.81%
21.52%
0.56%
0.34%
0.93%
0.53%
II. Long-term assets
20.34%
20.76%
25.31%
23.57%
1. Fixed assets
15.57%
16.67%
23.02%
21.74%
2. Investment property
0.00%
0.35%
0.00%
0.00%
3. Long-term investments
2.05%
2.20%
0.88%
0.70%
4. Other long-term assets
2.71%
1.53%
1.41%
1.13%
100.00%
100.00%
100.00%
100.00%
2. Short-term investment
5. Other current assets
Total assets
RESOURCES
I. Liabilities
1. Current Liabilities
1.1 Short-term borrowing
1.2 Account payable - trade
1.3 Advances from customers
1.4 Taxes payable to State Treasury
1.5 Payable to employees
1.6 Accrued expenses
1.7 Other payables
1.8 Bonus and welfare fund
2. Long-term Liabilities
2.1 Deferred taxes liabilities
2.2 Provision for severance allowance
2.3 Unearned revenue
2.4 Science and technology development
II. Equity
1.1 Share capital
1.2 Capital surplus
1.3 Treasury Shares
1.4 Investment and development fund
1.4 Financial reserves
1.5 Retained profits
2. Non-business expenditure fund and other
funds
III. Minority interest
Total resources
32.60%
29.12%
4.86%
4.69%
0.07%
2.34%
5.53%
10.59%
1.04%
0.00%
3.48%
0.00%
0.93%
0.00%
29.16%
25.91%
0.70%
4.74%
0.08%
2.20%
5.53%
9.28%
1.77%
1.62%
3.25%
0.00%
1.16%
0.01%
30.18%
27.26%
1.06%
6.19%
0.04%
1.42%
6.31%
8.31%
1.70%
2.23%
2.92%
0.00%
1.69%
0.00%
28.37%
27.48%
0.82%
3.10%
0.05%
1.41%
6.61%
10.18%
2.67%
2.63%
0.89%
0.00%
0.00%
0.00%
2.54%
2.08%
1.22%
0.89%
66.89%
17.52%
24.89%
-0.03%
0.31%
1.95%
21.75%
70.36%
14.79%
20.81%
-0.03%
11.23%
3.53%
20.02%
69.23%
32.66%
0.00%
-0.02%
14.35%
3.33%
18.91%
70.96%
27.49%
0.00%
-0.02%
20.65%
2.81%
20.04%
0.50%
0.00%
0.00%
0.00%
0.51%
100.00%
0.48%
100.00%
0.60%
100.00%
0.66%
100.00%
Dec 31, 2009
Total Revenue
Less sales deductions
Net Sales
Cost of Sales
Gross Profit
Financial Income
Financial Expenses
In which: Interest Expense
Selling Expenses
General and Administration
Expenses
Net Operating Profit
Other Income
Other Expenses
Gains from others
Share of losses in associates
Profit before Tax
Income Tax expense - current
Income tax benefit - deferred
Net Profit after Tax
Dec 31, 2010
Dec 31, 2011
Dec 31, 2012
100%
1.37%
98.63%
46.46%
52.17%
1.33%
0.19%
23.13%
6.42%
23.05%
100%
0.86%
99.14%
49.51%
49.63%
0.17%
0.00%
23.57%
6.58%
21.30%
100%
0.79%
99.21%
51.06%
48.14%
0.29%
0.00%
22.26%
7.38%
20.17%
100%
0.62%
99.38%
50.43%
48.95%
0.15%
0.09%
24.06%
7.40%
18.77%
0.80%
0.71%
0.09%
-0.01%
23.14%
2.65%
0.02%
20.47%
0.30%
0.45%
0.40%
0.05%
-0.19%
21.15%
2.50%
-0.02%
18.68%
0.11%
0.40%
0.61%
-0.22%
-0.40%
19.55%
2.90%
-0.07%
16.72%
0.17%
1.34%
0.28%
1.06%
-0.01%
19.83%
3.18%
-0.01%
16.66%
0.18%
31-Dec-09
31-Dec-10
31-Dec-11
31-Dec-12
100%
100%
100%
100%
Net cash generated from operating activities
19.99%
12.58%
10.49%
15.95%
Net cash used in investing activities
-0.95%
-3.62%
-7.50%
-2.97%
Net cash used in financing activities
1.99%
-6.12%
-9.98%
-4.44%
Revenue
Activity ratios
Liquidity ratios
Solvency ratios
Profitability ratios
Short Term Activity Ratios
Inventory Turnover
DOH
4.5
140
3.81
4
3.5
3
2.5
2
1.5
1
3.11
3.66
3.37
2.97
3.52
3.25
2.9
3.06
2. Days of inventory on hand
Lower level of inventory turnover will result
in higher days of inventory on hand ratio
DOH =
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒅𝒂𝒚𝒔 𝒊𝒏 𝒑𝒆𝒓𝒊𝒐𝒅
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓
120
100
80
60
40
0.5
20
0
0
2010
DHG
2011
PMC
2012
Health Care Industry
115.84
121.06
110.88
117.46
124.30
94.56
1. Inventory Turnover
Measure from 2010 to 2012 nearly 3.0
times per year, the entire inventory of
DHG was sold and replaced.
Inventory turnover =
2010
𝑪𝒐𝒔𝒕 𝒐𝒇 𝑮𝒐𝒐𝒅𝒔 𝑺𝒐𝒍𝒅
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚
2011
DHG
2012
PMC
Comparing to the ratio of Health Care Industry and PMC Company, The lower rates of inventory
turnover as well as the higher rate of DOH from 2010 to 2012 show:
-
DHG had adequate inventory and was prevented from the shortages, but it was a bad sign
because products tended to deteriorate as they sit in a warehouse.
-
Ineffective inventory management could lead to overstocking, deficiencies in the product line
or marketing effort
Source of Industry and PMC data: cophieu68.vn
Short Term Activity Ratios
DSO
Receivables Turnover
80.00
14.00
12.00
10.00
12.28
11.86
10.83
70.00
60.00
4. Days of sales outstanding
50.00
8.00
Lower level of receivable turnover will result in
5.51
5.32
6.00 higher 5.48
days of sales outstanding
4.00 Days of sales outstanding =
𝟑𝟔𝟎
𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓
40.00
30.00
20.00
10.00
2.00
65.75
67.65
65.36
3. Receivables Turnover
Measure from 2010 to 2012 nearly 5.4
33.24year, the entire receivables of
times per
30.36
29.31
DHG was collected theoretically
Receivables turnover =
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔
-
-
2010
2011
DHG
PMC
2012
2010
2011
DHG
2012
PMC
•
The Increase in accounts receivable turnover overtime indicates the improvement in process
of cash collection on credit sales.
•
Receivables turnover of PMC (10.83 – 12.28) was nearly double DHG’s (5.32 – 5.51) (as
well as the opposite side with DSO) show that DHG was taking longer to collect money from
customer. The company’s credit or collection policies was not too stringent
Short Term Activity Ratios
Payables Turnover
50.00
Number of days of payables
30.00
46.38
45.00
40.00
35.00
30.00
26.86
26.05
23.94
25.00
35.71
5. Number of days of payables 30.77
Lower level of payables turnover will result in
25.00
20.00 higher number of days of payables turnover
15.04
13.82
360
13.40
15.00 Number
of days of payables =
𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟
10.00
5.00
-
20.00
15.00
10.00
5.00
4. Payables Turnover
Measure from 2010 to 2012 nearly 14
times per year, the company pays of all its
11.70
10.08
creditors
7.76
Payables Turnover =
𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑟𝑎𝑑𝑒 𝑝𝑎𝑦𝑎𝑏𝑙𝑒𝑠
-
2010
2011
DHG
PMC
2012
2010
2011
DHG
2012
PMC
Having high liquidity in comparing with industry, the lower payables turnover ratio of DHG when
comparing with PMC shows that the company was exploiting the leniency in lending policy of
suppliers
Short Term Activity Ratios
7. Working Capital Turnover
2.78
2012
2.44
2.60
2011
2.47
2.34
2010
2.78
2.10
2.20
2.30
2.40
2.50
DHG
2.60
2.70
2.80
2.90
PMC
 0 < Working Capital Turnover: DHG Company had enough short term assets to
cover its short term debt
 Working Capital Turnover > 2 : DHG Company had too much inventory and was
not investing excess assets.
Long Term Investment
Activity Ratios
1. Total Asset Turnover
2. Fixed Asset Turnover
1.34
2012
1.89
1.31
2011
6.00
2012
8.57
6.53
2011
7.04
1.91
1.22
2010
7.53
2010
6.15
1.95
-
0.50
1.00
DHG
1.50
PMC
2.00
2.50
-
2.00
4.00
6.00
DHG
PMC
8.00
10.00
1. Current Ratio
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
4.54
4.42
3.47
3.06
2.74
3.25
2.78
2.74
1.38
1.51
1.47
1.50
2009
2010
2011
2012
DHG
Health Care Industry
PMC
1 < Commonly acceptable current ratio < 2
Current ratio measure 2.74, 3.06, 2.74, 2.78 VND in current assets for every 1 VND in current
liabilities at the end of 2009,2010,2011 and 2012 respectively.
The current ratio was too high (>2)  The company had high level of liquidity but may not was
using its current assets or its short-term financing facilities efficiently
Source of Industry Data: cophieu68.vn
2. Quick Ratio
3.00
2.50
2.00
2.19
2.02
2.49
2.31
1.98
1.76
1.79
1.61
1.50
1.00
0.86
0.79
0.80
2010
2011
2012
0.75
0.50
-
2009
DHG
Health Care Industry
PMC
Commonly acceptable quick ratio > 1
Quick ratio measure 2.02, 2.31, 1.76, 1.98 in current assets after excluding inventory for every
1 VND in current liabilities at the end of 2009,2010,2011 and 2012 respectively
Source of Industry Data: cophieu68.vn
3. Cash Ratio
1.60
1.40
1.36
1.35
1.33
1.20
1.00
1.10
0.86
0.83
1.14
0.86
0.80
0.60
0.40
0.20
-
2009
2010
2011
DHG
2012
PMC
Because cash ratio is the most stringent and conservative of the three liquidity ratios (current,
quick and cash ratio)
 Cash ratio > 1 in 3 years: 2009,2010 and 2012 indicates that DHG Company had enough
cash/ cash equivalent to pay off all current obligations easily  DHG has high liquidity
3.50
3.06
3.00
2.78
2.74
2.74
2.50
2.31
2.02
1.98
2.00
1.76
1.50
1.36
1.35
1.10
1.00
0.86
0.50
-
2009
2010
Current Ratio
2011
Quick Ratio
Cash Ratio
2012
Debt ratios
1. Debt to assets ratio
0.70
0.58
0.60
0.58
0.56
0.54
0.50
0.40
0.33
0.30
0.29
0.30
0.28
0.25
0.22
0.20
0.15
0.15
0.10
2009
2010
DHG
2011
Health Care Industry
2012
PMC
Debt to assets ratio < 0.5 measure that most of the company’s assets were financed through equity
 Company has more opportunities to borrow in the future at no significant risk.
Source of Industry Data: cophieu68.vn
Debt ratios
2. Debt to capital ratio
0.35
0.33
0.30
0.29
0.30
0.29
0.25
0.25
0.22
0.20
0.15
0.15
0.15
0.10
0.05
2009
2010
2011
DHG
2012
PMC
Debt to capital ratio measure 33%, 29%, 30%, 29% of DHG’s capital represented by debt in
2009,2010,2011 and 2012 respectively
Debt ratios
4. Financial Leverage ratio
3. Debt to equity ratio
1.60
0.60
0.50
0.49
0.44
1.20
0.40
0.40
0.33
1.40
1.28
1.18
1.33
1.18
1.00
0.80
0.28
0.30
0.18
1.44
1.41
1.40
0.41
0.20
1.49
0.60
0.18
0.40
0.10
0.20
-
2009
2010
DHG
2011
PMC
2012
2009
2010
DHG
2011
2012
PMC
0 (Liabilities = Equity) < Optimal debt to equity ratio < 0.5 - 1
1 (Liabilities = Equity) < Optimal financial leverage ratio < 1.5 - 2
Average ratio indicates that DHG company was talking advantage of the increased profits
that financial leverage may bring
Source of Industry Data: cophieu68.vn
1. Gross profit margin
0.60
0.52
0.50
0.48
0.49
0.38
0.38
0.38
2010
2011
2012
0.50
0.40
0.35
0.30
0.20
0.10
2009
DHG
PMC
DHG and PMC have the different trends in gross profit margin within 4 years
The DHG’s gross profit margin is much higher than PMC in this period (11% higher)
 Per VND of safe of DHG can contribute more money for gross profit than PMC
2. Net profit margin
0.25
0.20
0.19
0.20
0.17
0.15
0.17
0.14
0.12
0.15
0.15
0.10
0.05
2009
2010
2011
DHG
2012
PMC
DHG and PMC have the different trends in net profit margin within 4 years. From 2009 to
2010, PMC showed a great rise in net profit margin (from 0.12 to 0.14), while DHG’s rate
decreased slightly (from 0.2 to 0.19). In the period of 2011-2012, there are no change in
net profit margin of each company, DHG still much higher than PMC 2%
3. ROA – Return on total assets
0.30
0.28
0.28
0.27
0.25
0.23
0.23
0.28
0.22
0.22
0.20
0.15
0.10
0.10
0.11
0.10
0.10
2011
0.22
0.10
0.28
2012
0.22
0.10
0.28
0.05
-
DHG
Health Care Industry
PMC
2009
0.28
0.10
0.23
2010
0.23
0.11
0.27
4. ROE – Return on capital equity
0.45
0.42
0.40
0.36
0.33
0.35
0.30
0.25
0.34
0.32
0.32
0.32
0.28
0.25
0.23
0.23
0.24
0.20
0.15
0.10
0.05
-
DHG
Health Care Industry
PMC
2009
0.42
0.23
0.28
2010
0.33
0.25
0.32
2011
0.32
0.23
0.34
2012
0.32
0.24
0.36
•
Be used to analyze return on equity (ROE)
•
Uses basic algebra to break down ROE into a function of different ratios  analyst can
see the impact of leverage, profit margins, turnover on shareholder returns.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝐸𝑞𝑢𝑖𝑡𝑦
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
=
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
ROE =
= 𝑅𝑂𝐴
=
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑆𝑎𝑙𝑒𝑠
x
𝑥
x
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
𝐸𝑞𝑢𝑖𝑡𝑦
𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑎𝑡𝑖𝑜
𝑆𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
x
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
𝐸𝑞𝑢𝑖𝑡𝑦
= Net profit margin x Total asset turnover x Leverage ratio
DHG
ROE
=
PMC
ROA
x
Leverage
ROE
=
ROA
x
Leverage
2009
42%
28%
1.49
28%
23%
1.18
2010
33%
23%
1.41
32%
27%
1.18
2011
32%
22%
1.44
34%
28%
1.28
2012
32%
22%
1.40
36%
28%
1.33
DHG
PMC
=
Net profit
margin
x Asset
Turnover
2009
42%
20%
1.4
1.49
0.28
12%
2
1.18
2010
33%
19%
1.22
1.41
0.32
14%
1.95
1.18
2011
32%
17%
1.31
1.44
0.34
15%
1.91
1.28
2012
32%
17%
1.34
1.40
0.36
15%
1.89
1.33
ROE
x Leverage
ROE
=
Net profit
margin
x Asset
Turnover
x Leverage
Earning leading revenue / net profit after tax, but almost DHG’s ratios in 3 years
from 2009-2012 was not good as well as a small-scale company such as PMC
and had downward trends in the future.
Shortcomings:
• Inventory/ receivables management was not effective
• The company had high level of liquidity but may not was using its current
assets or its short-term financing facilities efficiently
• ROA  The ability of attracting investor’s attention 
If you are an administrator…
If you are an investor…..



Annual Report 2010 – 2011 -2012 of DHG JSC
Annual Report 2010 – 2011 -2012 of PMC JSC
Industry data : cophieu68.vn