BỘ TÀI CHÍNH

TRƯỜNG ĐẠI HỌC TÀI CHÍNH – MARKETING

KHOA TÀI CHÍNH – NGÂN HÀNG
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TIỂU LUẬN MÔN TÀI CHÍNH DOANH NGHIỆP 2

ĐỀ TÀI:

FINANCIAL ANALYSIS OF
HÒA PHÁT GROUP JOINT STOCK
COMPANY

Giảng viên bộ môn : TS. Thái Duy Tùng

Sinh viên thực hiện : Nguyễn Ngọc Sang
Lớp : CLC_20DTC02
Mã sinh viên : 2021009773
Tp. Hồ Chí Minh, tháng 09 năm 2022
 LIST OF FIGURES

Figure 1. Hoa Phat Group’s shareholder structure (08/2022)..........................................................3

Figure 2. Market share of long steel (construction steel)................................................................4

Figure 3. Assets tructure 2016-2021................................................................................................7

Figure 4. The rotation (times) and Inventory time (day) over the years..........................................9

Figure 5. Capital structure 2015-2021...........................................................................................11

Figure 6. Net sales and % change in Net sales 2019-2021............................................................12

Figure 7. Market of HPG construction steel by region..................................................................13

Figure 8. The proportion of sales in 2020......................................................................................14

Figure 9. The proportion of sales in 2021......................................................................................15

Figure 10. Cost of goods sold and % change 2019-2021..............................................................16

Figure 11. EBITDA and EBITDA rate 2016-2021.......................................................................18

Figure 12. Liquidity ratios 2019-2021...........................................................................................19

Figure 13. Profitabilities ratios......................................................................................................20

Figure 14. Hoa Phat's Profitability Ratios 2018-2021...................................................................20

Figure 15. Owner's equity, ROE and ROA of Hoa Phat 2016-2021.............................................21

Figure 16. Leverage Ratios 2019-2021.........................................................................................22

Figure 17. Debt to assets ratio 2019-2021.....................................................................................22

Figure 18. Debt to equity ratio 2019-2021....................................................................................23

Figure 19. Equity mutiplier 2019-2021.........................................................................................24

Figure 20. Hoa Phat's times interest earned ratio 2019-2021........................................................24

Figure 21. Efficiency Ratios 2019-2021........................................................................................25

Figure 22. Total asset turnover 2019-2021....................................................................................26

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 LIST OF TABLES

Table 1. Common-size Balance Sheets for Hoa Phat 2019-2021....................................................6

Table 2. Common-size Income Statement for Hoa Phat 2019-2021.............................................12

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 TABLE OF CONTENTS
LIST OF FIGURES.......................................................................................................................I

LIST OF TABLES........................................................................................................................II

I. OVERVIEW OF HOA PHAT JSC COMPANY....................................................................1

1.1. General information..............................................................................................................1

1.2. History of formation and development.................................................................................1

1.3. Shares and shareholders information....................................................................................3

1.4. Market share and competiors................................................................................................4

II. FINANCIAL STATEMENTS FOR 3 YEARS 2019, 2020 and 2021...................................6

2.1. Balance sheet........................................................................................................................6

2.1.1. Assets structure..............................................................................................................6

2.1.1.1. Current Asset..........................................................................................................7

2.1.1.2. Non – Current Asset...............................................................................................9

2.1.3. Liabilities and Stockholder’s Equity...........................................................................11

2.2. Income statement................................................................................................................12

2.2.1. Net revenue..................................................................................................................12

2.2.2. Cost of good sold.........................................................................................................16

2.2.3. Selling, genral and administrative expenses................................................................16

2.2.4. Interest expense...........................................................................................................17

2.2.5. Profit............................................................................................................................17

III. FINANCIAL RATIO ANALYSIS......................................................................................19

3.1. Liquidity ratios....................................................................................................................19

3.2. Profitability ratios...............................................................................................................20

3.2.1. Gross Profit Margin, Operating Profit Margin and Net Profit Margin........................20

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 3.2.2. Return on Asset (ROA) & Return on Equity (ROE)...................................................21

3.3. Leverage ratio.....................................................................................................................22

3.3.1. Debt to total assets ratio...............................................................................................22

3.3.2. Debt to equity ratio......................................................................................................23

3.3.3. Equity multiplier..........................................................................................................24

3.3.4. Times interest earned...................................................................................................24

3.4. Efficiency ratios..................................................................................................................25

3.4.1. Inentory turnover and Day’s sale in inventory............................................................25

3.4.2. Total Asset Turnover...................................................................................................26

IV. CONCLUSIONS...................................................................................................................27

4.1. Some problems and solutions.............................................................................................27

4.1.1. Financial risk and solutions.........................................................................................27

4.1.2. International trade risks and solutions.........................................................................28

4.1.3. HR Risks and solutions................................................................................................28

4.1.4. Policy risk and solutions..............................................................................................29

4.1.5. Solutions to improve inventory management and debt collection problems...............29

4.2. Conclusions.........................................................................................................................30

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Financial analysis of Hòa Phát group joint stock company

I. OVERVIEW OF HOA PHAT JSC COMPANY

1.1. General information

Company name: Hòa Phát Group Joint Stock Company

Short name: Hòa Phát Group

Stock ticker: HPG

Stock exchange: HOSE

Field: Basic materials

Charter capital: 44,729,227,060,000 VND (06/2021)

Current market capitalization: more than 6 billion USD (08/2022)

Address: Phố Nội A Industrial Park, Giai Phạm Commune, Yến Mỹ District, Hưng Yên
Province, Việt Nam.

Web: http://www.hoaphat.com.vn

1.2. History of formation and development

Hoa Phat is a leading industrial production group in Vietnam. Starting from a company
specializing in trading construction machines since August 1992, Hoa Phat in turn expanded into
other fields such as Furniture, steel pipes, construction steel, refrigeration, real estate and
agriculture. On November 15, 2007, Hoa Phat officially listed shares on Vietnam stock market
with stock code HPG.

Currently, the Group operates in 05 fields: Iron and steel (construction steel, hot rolled
coil) - Steel products (including steel pipes, galvanized steel, wire drawing, prestressed steel) -
Agriculture - Real estate Real estate – Household appliances. Steel production is the core
business, accounting for 90% of the Group's revenue and profit. With a capacity of 8 million tons
of crude steel per year, Hoa Phat is the largest steel producer in Southeast Asia.

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Hoa Phat Group holds the No. 1 market share in Vietnam for construction steel, steel pipes
and Australian beef. Currently, Hoa Phat Group is in the Top 10 largest private enterprises in
Vietnam, Top 10 most profitable enterprises, Top 5 listed companies with the largest charter
capital in Vietnam's stock market. HPG's market capitalization reached 11 billion USD
(06/2021), among the top 15 steel companies with the largest market capitalization in the world
steel industry.

With the business philosophy of "Harmony and development", Hoa Phat spends hundreds
of billions of dong per year to fulfill its corporate social responsibility to the community. Some
outstanding achievements in recent years:

2018 Hoa Phat Ton Co., Ltd officially provides the market with high quality color
coated steel sheet products.

Quarter III Hoa Phat Steel Pipe Co., Ltd. decided to invest in the construction
and installation of a large steel pipe production line at the factory in Hung Yen.

October 2018 For the first time, the consumption volume of Construction Steel
reached a record of 250,000 tons.

September 2019 Hoa Phat Equipment & Parts Co., Ltd officially
2019 changed the company's name to Hoa Phat Metal Fabrication Co.,Ltd.
In November 2019, Hoa Phat Steel reached 300,000 tons for the first time in
November, the steel market share exceeded 26%.

In November 2020, Hoa Phat Group began to supply commercial hot rolled
2020 coil products to the market. The product helps to optimize Hoa Phat steel
ecosystem.

In December 2020, Hoa Phat Group divested from the furniture segment.

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In December 2020, Hoa Phat Group restructured its operating model with the
establishment of Corporations in charge of each field of operation of the
Group.

Accordingly, 4 corporations under the group were established, Including: Iron

and Steel Corporation, Steel Products Corporation, Real Estate Corporation,
Agriculture Corporation.

2021 In January 2021, blast furnace No. 4 - Hoa Phat Dung Quat Iron and Steel
Complex was put into operation, marking the completion of the entire project,
bringing Hoa Phat's total crude steel capacity to 8million tons/year.
In 2021, the group buys ore mines with large reserves in Australia.

In 2021, Hoa Phat Group implemented many major projects such as Hoa Phat
Dung 2 Iron and Steel Manufacturing Union, General Port in Dung Quat
Economic Zone, container factory in Ba Ria - Vung Tau, House Machine
manufacturing household electronics in Ha Nam ...

1.3. Shares and shareholders information

Hoa Phat Group Joint Stock Company was officially listed on the Ho Chi Minh’s stock
Exchange (HOSE) in November 2007. The group's accounting period begins on January 1 and
ends on December 31. HPG’s independent auditor is KPMG in 2018, 2019 and 2020.

As of August 30, 2022, the total number of HPG's shares is 5,814,785,700. The largest
shareholders are Mr. Long Tran (26,08%) and his wife Vũ Thị Hiền (7,34%). Foreign ownership
stands at 24,94%.

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Financial analysis of Hòa Phát group joint stock company

Figure 1. Hoa Phat Group’s shareholder structure (08/2022)

1.4. Market share and competiors

According to data from the Vietnam Steel Association, Hoa Phat Group is leading in terms
of construction steel consumption market share with 36.3%. In second place is VNSteel with
12.5% market share, followed by Formosa Hà Tĩnh, Vinakyoei and Pomina with 6.7%, 5.9% and
3% market share respectively.

Figure 2. Market share of long steel (construction steel).

In January 2022, Hoa Phat Construction Steel achieved a sales volume of nearly 382,000
tons, 2 times more than January 2021. In particular, the export of construction steel in January

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reached 116,000 tons, 3 times the same period of 2021 and accounted for 50% of the total
amount of construction steel exports of Vietnam. Hoa Phat construction steel market share in
Vietnam reached 36.3%, up nearly 6% compared to the end of 2021.

This is a great competitive advantage in the field of basic goods production. The reason
why Hoa Phat has this advantage is:

Firstly, Hoa Phat produces using BOF blast furnace technology, with input materials
mainly including iron ore and coke for a much lower production cost than production using EAF
electric furnace technology with raw materials. in is scrap steel and electricity.

Secondly, Hoa Phat has the advantage of larger scale than other steel manufacturers,
thereby helping to reduce the cost of transporting materials and the proportion of fixed costs per
product unit.

Thirdly, By meeting the strict standards of UK Cares, JIS (Japan), ASTM (USA), BS
(UK), Hoa Phat's high quality construction steel continuously receives large orders on the
market. international School. The main export market includes Singapore, Hong Kong, Canada,
Japan, Korea and Cambodia.

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II. FINANCIAL STATEMENTS FOR 3 YEARS 2019, 2020 and 2021

2.1. Balance sheet

Table 1. Common-size Balance Sheets for Hoa Phat 2019-2021

2.1.1. Assets structure

The Group's total assets increased sharply in 2021, up nearly 36% compared to 2020. In
which, long-term assets still accounted for the majority when increasing by 9,318 billion
VND, reaching 84,082 billion VND, thereby showing the process. Investment in fixed assets
is still recognized by the Group as additional assets when major projects are completed. 2021

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will record a sharp increase in short-term assets to VND37,408 billion, equivalent to an

increase of 66% over the same period in 2020. This sharp increase is to supplement the
starting working capital for production scale to stature. new. By the end of 2021, the asset
structure will gradually be in balance, short-term assets account for 53%, long-term assets
account for 47%. The scale of total assets tripled after only 4 years (from 2017, the time to
start investing in the construction of Hoa Phat Iron and Steel Complex Project in Dung Quat).
This is still the appropriate and typical asset structure of the industrial manufacturing industry.

Figure 3. Assets tructure 2016-2021

2.1.1.1. Current Asset

From 2020, current assets account for more than half of total assets and are larger
than current liabilities, which is one of the signs that the liquidity position of the group is
relatively positive.

Total short-term assets increased dramatically: total short-term assets in 2019 was
30,436 trillion VND, up to 2020 it increased by 56,747 trillion VND (increased to 26,311
trillion VND, equivalent to an increase of 86.4% compared to 2019). But by 2021 it
increased sharply (it must be called a spike) to 94,154 trillion (up to 37,407 trillion VND,
the proportion of 2020 has increased to 65.92% compared to 2020). This can be explained
by the increase of short-term assets, specifically:

Cash and cash equivalents: Cash and cash equivalents from 2019 to 2021 increased
sharply to VND 18,236 trillion in 2021 (up to VND 17,927 trillion and the proportion of
394.4%, much higher than in 2019) this shows that the company currently has strong cash

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flow, high liquidity, this much money will always be in the active state of the company in
any possible event, increasing the autonomy, increasing the ability to pay the due debts and
improving the reputation for company.

Short-term investments: Finally, in 2021, Hoa Phat will invest more strongly in
short-term investments up to 18,236 trillion VND (increasing to 6,752 trillion VND and the
proportion also increased sharply to 1227.2% compared to 2019). The reason for such a
strong increase in 2020 is because this business is doing very well, that's why Hoa Phat
wants to spend money or use its capital to invest in steel to promote the great Dung Quat
project.

Short-term receivables: in 2021, this amount will skyrocket to 7,662 trillion VND (up
more than 2019 up to: 4,101 trillion VND and the proportion also increased to 115.2%).
Part of the reason is that it shows that this company sells a lot of goods and products due to
its good growth in revenue, and secondly, that the company has relaxed its credit policy
because the company does not Want to quickly sell inventory items.

Inventory: Inventory is always an important item for any manufacturing business. If

we look at the balance sheet, we can see that Hoa Phat's scale increased, reflected in the
increase in inventory. This category increases year by year such as: 2020 reached VND
26,286 trillion, an increase of 35.41% compared to 2019 and reached a figure of VND
42,134 trillion in 2021 (an increase of VND 6,874 trillion, the proportion of 360.3% also
increased compared to that of 2020). Inventory accounted for 45%, inventory turnover as
of December 31, 2021 was 3.17 times, corresponding to a decrease of 19 days compared to
the number of days of inventory turnover in 2020. The sharp increase in inventory and an
increase in inventory turnover show the fast turnover of goods and good consumption of
goods, showing that the Group's inventory management is always monitored, monitored
and operated. effective action.

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Figure 4. The rotation (times) and Inventory time (day) over the years

Two reasons for this sharp increase in inventories: one is that the inventory is too
large because it cannot be exported (cannot be sold); The second is that the amount of
goods available is so much that it is likely to explode at any time (eg the ability to supply
the market's demand). In simpler explanation, these are product items that are kept by
businesses to sell later. Or the stock items a company makes for sale and the ingredients
that make up the product.

As for other short-term assets: It has almost no significant changes over the years.

2.1.1.2. Non – Current Asset

In 2020, long-term assets increased slightly because only a few asset categories were
recorded during the year. Specifically, as of December 31, 2020, long-term assets reached
VND 74,764 billion, up 5% over the same period last year. In 2021, Long-term assets
increased due to the asset items recorded during the year, with great value being the blast
furnace item No. 4 of Hoa Phat Dung Quat Iron and Steel Complex came into operation.
Long-term assets increased by 12% over the same period in 2020, as of December 31,

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2021, long-term assets reached VND 84,082 billion. Fixed assets, investment properties
and long-term unfinished assets account for 95%.

For a long time from 2019 to the end of the first quarter of 2021, Hoa Phat was
always in a situation where long-term assets far exceeded short-term assets. This is also the
time when Hoa Phat focused on investing in Dung Quat Complex Project phase 1 with a
total capital of 65,000 billion VND, capacity of 5 million tons of steel/year. Most of the
profits that Hoa Phat made in the years 2018-2020 were poured into basic construction
activities in Dung Quat, causing long-term assets to increase. In 2021, Hoa Phat also
invests in 2 projects: Manufacturing factoryexporting containers in Ba Ria - Vung Tau and
building factories to produce household appliances.

For fixed assets in general, it accounts for the largest proportion of total assets of Hoa
Phat. Financial data also show this more clearly. Hoa Phat's fixed assets increased from
VND 31,249 trillion at the end of 2019 to VND 69,280 trillion at the end of 2021, showing
that this company is buying a lot of machinery and equipment, expanding or building a
factory to make many products. so that they can expand their business and increase their
revenue (and obviously invest mainly in the Dung Quat project). After 2 years of
construction investment, Hoa Phat's long-term unfinished construction cost item decreased
from VND 38,107 trillion to VND 6,247 trillion. This is because the Hoa Phat Dung Quat
complex came into operation in the second half of 2019. In the year 2020, a series of
components of this consortium will also come into operation. When construction in
progress was reduced to fixed assets, Hoa Phat's profit capacity skyrocketed.

Long-term investment: In 2019, Hoa Phat's long-term investment amount was 45

billion dong, down more than 20 billion dong compared to 2018's 66 billion dong. But by
2020, it will increase strongly to 171 billion VND, much higher than 2019. The reason is
that Hoa Phat is promoting production in the iron and steel sector to invest in the Dung
Quat project: especially hot-rolled coil steel is the trump card that creates a new stature for
Hoa Phat in the steel industry. Orders of hot rolled coil (HRC) exceeded 300% of Hoa
Phat's capacity.

As for real estate investment and other long-term investments, it has almost no
significant changes over the years.

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2.1.3. Liabilities and Stockholder’s Equity

Short-term debt: Hoa Phat's short-term debt increases year by year but is still the
strongest in 2021 at VND 73,459 trillion. From the financial statements, it can be seen that in
certain years like 2020-2021, Hoa Phat promotes short-term financial borrowing. This cash
flow is carried for short-term financial investment. As of December 31, 2020, the total short-
term financial investment and cash was about VND 21,000 billion, and short-term debt also
increased similarly. It can be understood simply that Hoa Phat, with its position as a leading
large enterprise in the industry, can take short-term loans at low interest rates, then invest in
short-term investments with higher interest rates to enjoy the difference. The most recent
phenomenon of using this operation was before Hoa Phat invested in the Dung Quat project in
2017. In the 2 years of 2018 and 2019, this strategy was not implemented because the
enterprise was focusing on investing in the big project. When the Dung Quat project went into
stable operation, this group used financial operations to increase profits.

Owner's equity: In 2020, the equity ratio decreased to 45.03% in 2020. In general, it is
easy to explain that this is due to long-term debt and short-term debt of the company.
Enterprises increase every year to invest in projects as mentioned above, so the proportion of
equity capital is less. And Current Assets in 2020 are 56,747, Current Liabilities are 51,975;
This shows that working capital has a positive sign, so the business still maintains financial
balance. In 2021, the Group's financial structure is maintained at a stable level. Owner's
equity increased by 53%, from 59,220 billion dong to 90,780 billion dong, coming from the
profit stream made during the year.

Figure 5. Capital structure 2015-2021

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2.2. Income statement

Table 2. Common-size Income Statement for Hoa Phat 2019-2021

2.2.1. Net revenue

Figure 6. Net sales and % change in Net sales 2019-2021

Hoa Phat's net revenue continuously grew strongly with a compound annual growth rate
of 52.7% in the period of 2019 and 2021 due to the increase in production output of Hoa Phat
Dung Quat Iron and Steel Complex project (blast furnace No. 3 and 4 of Hoa Phat Dung Quat

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Iron and Steel Complex came into operation), sales volume increased, Hoa Phat hot rolled
coil (HRC) was introduced to the market, .

In 2020, revenue increased by 41.13% compared to 2019. Steel production continues to

play a key role and affirms as the core business of the Group. This group's revenue grew by
81%, largely due to the increase in output of the Hoa Phat Dung Quat Iron and Steel Complex
project. Revenue of the Steel sector accounted for 84% of the whole Group.

In terms of consumption, in 2020, the total output of construction steel, billet, pipe and
corrugated iron consumed is 6,770,000 tons, up 1.2 times compared to 2019. In terms of
regions, the Southern region recorded 784,000 tons, an outstanding growth of 70% over the
same period. In the central region, despite the stressful Covid-19 epidemic and unfavorable
weather conditions, sales volume in this area still grew slightly compared to 2019. Hoa Phat
Steel in the Northern region still maintained the largest sales volume, accounting for 48% of
Hoa Phat's total steel products sold. In the export market, exported finished steel products
reached nearly 540,000 tons, up 2 times over the same period. Construction steel export
markets include Japan, Korea, Canada, Australia, Cambodia, Laos, Malaysia, Taiwan,
Indonesia, Ghana, and Kenya. In addition, Hoa Phat Group also exports 1.7 million tons of
square billets to produce construction steel to countries such as Thailand, China, Malaysia,
Indonesia, Taiwan, and Sri Lanka.

Figure 7. Market of HPG construction steel by region

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Besides, in August 2020, blast furnace No. 3 Hoa Phat Dung Quat Iron and Steel
Complex was put into operation, Hoa Phat hot rolled coil was officially launched to the
market. Right from that time, domestic and foreign customers continuously ordered Hoa
Phat's hot rolled coil (HRC) products. The number of orders HRC delivered in the first quarter
of 2021 exceeded 300% of the Group's production capacity. HRC production output of Hoa
Phat Dung Quat Iron and Steel Production Complex in 2020 will reach nearly 700,000 tons.

The Agriculture sector also made great strides with revenue growth of 32% and
contributing 12% to the Group's revenue. The strong growth of the livestock and feed sectors.
Hoa Phat's agricultural products such as Australian cows, bio-safe pigs, and clean chicken
eggs are at the top of the market, thereby showing great potential for development in the
coming years.

Figure 8. The proportion of sales in 2020

Revenue in 2021 increased by 65.28% compared to 2020. In which, the main

contributor was still the steel industry with revenue growth of 83%, largely thanks to the blast
furnaces at Hoa Phat Dung Quat Iron and Steel Production Complex that were already
operational. operating at full capacity; real estate industry grew 126%.

Along with the growth, the Steel sector continues to play a leading role and affirms the
core business of the Group. Revenue of this segment accounts for 94% of the whole Group. In
2021, the total sales volume of billet, construction steel, steel pipe and galvanized sheet is

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8,871,000 tons, up 35% compared to 2020. Besides, Hoa Phat provides more than 3 million
tons HRC to the market.

In 2021, export activities have a large growth, contributing an important part in the total
output. Revenue from export reached VND 49,722 billion, accounting for 33% of the Group's
total revenue in 2021. The export market is very diverse such as Canada, Australia, Japan,
Korea, China... The field of steel pipe - galvanized sheet will become a trade surplus in the
Group in 2021 (reaching 297,000 tons, contributing 69% of the total volume. Hoa Phat steel
sheet supplied to the market). The export promotion helps Hoa Phat diversify its consumption
markets while the domestic market is affected by the Covid-19 pandemic.

The agricultural sector brought in 718 billion of profit after tax. The proportion of
revenue and profit accounted for 5% and 2% of the whole Group, respectively. In 2021, due
to the prolonged effects of the Covid-19 epidemic and social distancing measures, restaurants,
schools, tourism, etc. will close, reducing the market's consumption for Australian beef and
domesticated eggs. holding, the selling price of pigs also dropped sharply. This is the reason
why the revenue and profit after tax of the agricultural sector decreased sharply compared to
the previous year. However, the quality of Hoa Phat's agricultural products such as Australian
cows and clean chicken eggs are always at the top of the market, along with the expansion of
distribution channels showing great potential for the agricultural sector to develop. develop in
the coming years.

Figure 9. The proportion of sales in 2021

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2.2.2. Cost of good sold

Figure 10. Cost of goods sold and % change 2019-2021

In general, the cost of goods sold of the Hoa Phat company increased steadily compared
to net sales. Enterprise increased in cost of goods sold depending on the size of the business.
The reason for the increase in COGS is the high input costs. The cost of the materials used to
create the goods, the direct labor costs used to produce the goods are high. In terms of
proportion, for Hoa Phat Company, the cost of goods sold of accounted for 72-82% of net
revenue. Although Cost of goods sold increased, the company's net revenue still increased
correspondingly, proving that the company is quite efficient and increasing year by year. That
shows that Hoa Phat has good cost management, making the Net Income ratio higher.

2.2.3. Selling, genral and administrative expenses

Looking at the data, we can see that, in the group of selling and
administrative expenses, selling expenses always account for a proportion nearly
twice as high as general and administrative expenses for Hoa Phat. This is also
an understandable expression, because in the sales and distribution department
of an enterprise, advertising costs, transportation assets, other purchasing costs,
etc. are always greater than administrative costs enterprise. These ratios of Hoa
Phat, through the statistical table, tend to fluctuation slightly over the years. This
shows that Hoa Phat is gradually managing costs better.

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2.2.4. Interest expense

Interest expense is the cost that lenders charge borrowers for using their
money. Interest expense represents the interest payable on any loan – a bond,
loan, convertible debt or line of credit.

For Hoa Phat, interest expenses accounted 1.47% in 2019, 2.43% in 2020.
In general, Hoa Phat's interest expenses increased over the years, which is also
easy to recognize. can be seen when the company expands its operation scale
and invests in development, especially in the construction industry such as Hoa
Phat in particular and other enterprises in the same industry in general.

2.2.5. Profit

In 2021, the Group's profit after tax increased by 156% over the same
period in 2020 when it reached VND 34,520 billion, setting the highest record
ever. The ratio of profit after tax to net sales in 2021 reached 22.88%. The profit
exceeded the target, the profit margin was good, showing the effectiveness of
the Group in cost management despite the high ore price and the advantage of a
closed production process from upstream.

Ebitda (profit before tax, interest and amortization) in 2021 is VND 45,669
billion, up 99% compared to 2020 showing net efficiency from business
activities excluding corporate income tax, interest and cash flows. Depreciation
increased dramatically compared to the previous year. Ebitda grew strongly
compared to previous years. In 2021, Ebitda in a quarter reached more than
VND 13,500 billion, 8 times higher than in the first quarter of 2016. Ebitda
increased strongly each quarter, mainly contributed by Hoa Phat Dung Quat Iron
and Steel Complex Project. Ebitda ratio has increased significantly, currently

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maintaining 30.27%. Therefore, Hoa Phat has a better Ebitda revenue and profit
margin than many steel companies globally.

Figure 11. EBITDA and EBITDA rate 2016-2021

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III. FINANCIAL RATIO ANALYSIS

3.1. Liquidity ratios

Figure 12. Liquidity ratios 2019-2021

Regarding the current ratio, current assets are enough to cover the short-term liabilities of
HPG. This ratio fluctuates slightly from 2019 to 2021 but remains above 1. Current ratio
decreased from 1.13 in 2019 to 1.09 in 2020 and increase to 1.28 in 2021. However, for a large
corporation like Hoa Phat, the coefficient always remained above 1, showing that the Group's
ability to pay short-term liabilities as well as the ability to convert assets into cash to cover debt
was quite good. In addition, in 2021, HPG increased the amount of financial investment and
cash equivalents to nearly 35 trillion compared to 2019 , accounting for more than 37% of
current assets to ensure good liquidity.

The trend of quick ratio decreased from 0.49 in 2018 to 0.41 in 2019. This came from the
fact that the current assets did not increase strongly because the company is spending money to
complete the Dung Quat project while the inventory increased by 37.5% due to certain
requirements in the operation of the Dung Quat plant. In specific, when blast furnaces 1 and 2
with large capacities are put into operation at the end of 2019, they must operate continuously
24/7. Besides, current liabilities in this period also increased instead of reducing. By 2021, this
ratio had an improvement, increasing to 73.2% compared 2019 and because the entire Dung Quat
iron and steel complex was put into operation and officially commercialized. At this time, its
inventory only accounted for 44.7% of current assets, instead of more than 63,78% in 2019. This
came from the increase in the current assets of Hoa Phat because the company took on more
short-term debt and then used them for short-term financial investment, one item of current
assets.

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3.2. Profitability ratios

Figure 13. Profitabilities ratios

3.2.1. Gross Profit Margin, Operating Profit Margin and Net Profit Margin

2021

Figure 14. Hoa Phat's Profitability Ratios 2018-2021

All the three ratios Gross Profit Margin, Operating Profit Margin, and Net Profit Margin
in the period 2019 - 2021, have a up trend. Hoa Phat's sales revenue in 2021 reached 149,679
trillion VND, up 135.1% compared to 2019. Hoa Phat's business results depend a lot on the
price of input materials and production costs. Although the iron ore price in 2020 is still high,
the sales volume of all kinds of steel products and their selling price on the market increased
sharply, leading to both sales revenue and profit of Hoa Phat increasing. Hoa Phat's total
consumption of steel products in 2020 is estimated at 6.7 million tons (increased 1,2 times
compared 2019 ), and since September 2020, Hoa Phat has started to make the first move to
increase prices to compensate for the increase in raw material prices. Especially in December
2020, they have increased the bar steel price five times, increasing 2,500 VND/kg. With this
increase, Hoa Phat has offset the increased production costs due to ore prices.

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Another critical factor that made Hoa Phat's profitability ratios continuously increased is
Hoa Phat Dung Quat Complex. After putting blast furnaces No. 1 & 2 at Hoa Phat Dung Quat
Complex into operation from the end of 2019, HPG continued to operate blast furnace No. 3
(belonging to phase 2 of the KLH project) in August 2020, increasing the capacity of raw
steel of the whole group to 8.5 million tons per year in 2021. In addition to the increase in
output, gross profit margin gradually improved over quarters in 2020 due to the additional
contribution of Hot Rolled Coil (HRC), a product of Hoa Phat Dung Quat Complex, with the
market price continuously increasing, to about 700-770 USD/ton.

3.2.2. Return on Asset (ROA) & Return on Equity (ROE)

Figure 15. Owner's equity, ROE and ROA of Hoa Phat 2016-2021

Important metrics when evaluating performance are ROE (return on equity) and ROA
(return on assets). In 2020, Hoa Phat's ROE reached 22.8%, significantly higher than the level
of 15.9% in 2019. Along with that, the Group's ROA also increased again from 7.4%. in 2019
to 10.3% in 2020. While assets increased by 29.2%, ROA improved over the same period in
2019 mainly thanks to a strong increase in profit after tax.

In 2021, Hoa Phat's ROE will reach 38%, significantly higher than 22.8% in 2020.
Thus, for every 100 VND of capital spent, 38 VND of profit will be obtained. The strong

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increase in ROE along with a low debt ratio reflects the Group's efforts in optimizing the
efficiency of capital use of shareholders without being dependent on financial leverage.

Along with that, the Group's ROA also increased again to 19.4% from 10.3% in 2021.
Assets increased by 36% while ROA improved compared to the same period in 2020,
showing Strong increase in profit after tax is the main factor to improve this index. Hoa Phat's
ROA and ROE ratios have grown steadily and favorably, proving Hoa Phat's financial ability
and competitive advantage in the market.

3.3. Leverage ratio

Figure 16. Leverage Ratios 2019-2021

3.3.1. Debt to total assets ratio

Figure 17. Debt to assets ratio 2019-2021

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From 2019 to 2021 because the company sharply increased debt to invest in the
construction of the Dung Quat iron and steel complex and invest for its other
projects(container factory in Ba Ria - Vung Tau, House Machine manufacturing household
electronics in Ha Nam,...) . This is completely normal for a company that is looking to extend
the production cycle to a larger scale. In addition, when taking on more debt, the company
also increased its equity by 24% in 2020 and 90% in 2021 to create a more balance in capital
structure, helping the debt to equity ratio stay at a safe level, Hoa Phat's index from 2019 to
2021 increased from 0.53 to 0.55 and decreased to 0.49 always less than 1, which means that
the company's assets were still primarily financed by equity rather than debt.

3.3.2. Debt to equity ratio

Figure 18. Debt to equity ratio 2019-2021

Hoa Phat's ratio from 2019 to 2020 is 1.12 and 1.22 respectively from 2019 this ratio is
greater than 1 which means that the company's assets are financed mainly by debt, showing
that the company has difficulties in debt repayment and increased risk for investment
shareholders. But through 2021, owners' equity increased sharply, increasing by 53.3%
compared to 2020, causing the debt-to-total capital ratio to decrease to 0.96 smaller. This
means that the company's assets are still primarily financed by equity rather than debt.

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3.3.3. Equity multiplier

Figure 19. Equity mutiplier 2019-2021

Hoa Phat's coefficient in 2019 and 2020 it increased to 2.13 and 2.22>2, showing that
the company began to depend on other debt and interest bearing loans but not high. But in
2021 is 1.96<2 showing that the company's assets are mostly equity.

3.3.4. Times interest earned

Figure 20. Hoa Phat's times interest earned ratio 2019-2021

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Times interest earned tended to decrease in the period from 2019 to 2021 due to the
sharp increase in interest expenses in 2019 when furnace No. 1 and No. 2 came into operation,
and in 2020, when Furnace No. 3 and No. 4 comes into operation. When the entire Dung Quat
iron and steel complex came into operation and officially went into commercial exploitation,
the interest expense was no longer capitalized but recognized as a financial expense in the
Income Statement. However, Hoa Phat will not face significant obstacles or pressure when
paying interest because HPG's profit and revenue both increased markedly compared to the
previous year. In the long term, Hoa Phat's main business profit will continue to increase
thanks to the huge capacity of the Dung Quat iron and steel complex.

3.4. Efficiency ratios

Figure 21. Efficiency Ratios 2019-2021

3.4.1. Inentory turnover and Day’s sale in inventory

Inventory turnover increased continuously from 2019 to 2021, at December 31, 2021
was 3.17 times, corresponding to a decrease of 19 days compared to the number of days of
inventory turnover in 2020. Inventories increased sharply in the same cycle. Inventory
turnover also increased, showing fast goods turnover and good consumption rate, showing
that the Group's inventory management is always monitored, monitored and operated
effectively.

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3.4.2. Total Asset Turnover

Figure 22. Total asset turnover 2019-2021

From 2019 to 2021, the total asset turnover ratio increased continuously and reached
85%, up 21% compared to 2019. The reason is that Dung Quat Complex officially came into
operation at the end of 2019 and 2019. In 2020, Hoa Phat's steel output will increase sharply.
The increase in output caused a sharp increase in steel consumption demand as well as steel
price in 2020, contributing largely to the company's 65% revenue growth rate in 2021. The
strong increase in Total Asset Turnover shows that Hoa Phat's decision to invest in fixed
assets, specifically Dung Quat Complex, is correct and the company is gradually improving
efficiency in asset management.

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IV. CONCLUSIONS

4.1. Some problems and solutions

With the characteristics of a multi-industry and multi-field manufacturing enterprise, a

large scale of operations throughout the territory of Vietnam and initial investment in the
international market, Hoa Phat Group cannot avoid the risks of the operation process arising in
the future. To effectively prevent these risks, the Group sets out specific measures for each of the
main risk groups, especially in terms of disease prevention, legal, personnel and policy.

4.1.1. Financial risk and solutions

The proportion of imports accounted for 73% of the total cost of the whole group in
2021 shows that the amount of input materials of the Group such as coal, ore, ... depends
heavily on the supply of goods from abroad. Import value is more than exports, so the
exchange rate greatly affects production costs. The exchange rate increased, leading to
increased cost of buying materials and increased financial expenses. Therefore, exchange rate
risk management is a work that needs to be handled daily.

Besides, with the use of loans, financial instruments, derivative products with interest
rates, posing challenges for Hoa Phat on interest rate management to effectively manage
interest expenses

Solution:

Financial risk management should include exchange rate risks and interest rate risks by
many different measures and tools. The first is to balance the credit with the use of VND or
foreign currency. The Group requires member units when buying or selling or expected to buy
foreign currencies, they must talk to the exchange rate leader and update the market price. In
addition, Hoa Phat must regularly collect information and market forecasts; Develop limits
and tools to prevent exchange rate with credit institutions. Hoa Phat should actively assess the
situation of capital and financial markets and take measures to minimize interest rate risk by
adjusting the list of total debt and obligations to be reasonably paid. With these measures and
tools, it will help the company to manage the input materials well, ensure good management
of the cost to achieve high profit margin.

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4.1.2. International trade risks and solutions

Not only because of disease, steel exports are also faced with a series of risks of trade
defense lawsuits when going to the world market, causing Vietnam's steel industry to face
double difficulties in 2021.

In particular, steel imported from China with cheap prices is greatly affecting domestic
consumption. The trend of protection in the international market has not shown signs of heat
reduction, real estate market, domestic construction has no signal to prosper. But this is also a
"test" for Hoa Phat to restructure, improve competitiveness and dominate market share.

Solution:

The EU-Vietnam Free Trade Agreement (EVFTA) and the Trade Agreement RECP
took effect from November 2020, contributing positively to the steel export market. Hoa Phat
itself also has to prepare carefully to accept the opportunity as well as to meet the committed
technical standards; understand the legal framework of the market and technical barriers to be
more proactive in exporting, avoiding the troubles of trade remedy lawsuits.

Actively approach and increase competitiveness through cost savings, management

improvement, product quality improvement, and market expansion. The Group should
continue to review and re-evaluate its sales policy and distribution system to make appropriate
adjustments to ensure increased sales volume, build a stable and developed distribution
system. Castle. Along with that, Hoa Phat should also restructure production and business
according to market signals.

4.1.3. HR Risks and solutions

With over 27,600 employees from all regions of the country, the young working age and
changes in personnel are always issues that need special attention. While the steel production
sector always requires a large number of skilled and specialized technical workers, Vietnam's
training system in the field of mechanical engineering has not met the actual requirements.

Solution:

Considering people as the central factor for success, always focusing on training,
improving professional qualifications and skills for employees.

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Continuously organize specialized training classes, closely coordinate with universities,

colleges, mechanical and technical vocational training schools in training and recruitment in
order to attract qualified personnel. meet the requirements of business development. Human
resource development policy both in terms of quantity and quality has always been uniformly
implemented. Implement the personnel rank evaluation system to standardize the human
resource system on a Group-wide scale and gradually apply it in the calculation and payment
of decent wages to motivate employees.

4.1.4. Policy risk and solutions

If the difficulties that small businesses often mention are accessing capital, land,
markets, customers, etc., for large enterprises like Hoa Phat, it is the risk of changing policies
and administrative procedures.

In the past 5 years, Vietnam's business policies and regulations often change
unexpectedly, happening too quickly in a short time. Meanwhile, businesses need stable,
long-term, transparent, predictable and consistently applied policies to be assured of
production and business.

Solution: Take the initiative to adapt and stick to the document right from the early days
when the draft Law was released for public opinion, carefully studied the changing legal
regulations that may affect the Group's production and business activities. team to predict and
predict, thereby developing a timely adjustment plan.

4.1.5. Solutions to improve inventory management and debt collection problems

Inventory management: managers must come up with a plan to both meet the needs of
expanding production and business while ensuring high inventory levels. The company can
apply policies such as: apply inventory discount to recover capital. Apply promotions and
incentives to customers. In the long term, it is advisable to find more domestic and foreign
consumption channels. And cut those costs, finding ingredients at the most reasonable price
possible.

Improved debt collection: Hoa Phat needs to take tougher measures in this regard. Debt
collection is not an easy job. Therefore, the company needs to establish a credit policy

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according to which each customer will rate the creditworthiness and thereby offer reasonable
terms and conditions.

4.2. Conclusions

After analyzing the financial situation of Hoa Phat Group Joint Stock Company through
financial statements and financial indicators in the period 2019-2021, a relatively difficult period
with the Covid-19 epidemic situation. From here, I has drawn the achievements that the company
has achieved, but besides that, there are still many difficulties.

The analysis results show that Hoa Phat has good business results. Total assets of the
company have continuously increased over the years, especially fixed assets have increased
sharply because the company has plans to expand production and business. Besides, the total
capital of the company also increased. At this stage, the company has attracted customers by
applying reasonable discounts. Those are also the reasons that despite the difficult situation, the
company's profit and revenue were not affected much.

Next is the net cash flow from operating activities for 3 consecutive years with positive
signs, showing that the company's profit is greater than its expenses. Along with the increase in
cash and cash equivalents, the company has more cash in reserve to boost production.

Through analyzing the ratios reflecting solvency, we can conclude that the company has
reached a safe level in paying short-term debt and interest.

Besides those achievements, there are some limitations that Hoa Phat encountered during
this period: Inventory is always a sore problem for the company, In the period of 2019-2021, this
item accounts for 18 years. up to 23% of total assets. That entails the cost of inventory
management.

In an increasingly integrated economy, to survive requires businesses in general and Hoa

Phat Group Joint Stock Company in particular to be proactive, constantly striving, and improve
working efficiency; at the same time, continue to maintain and develop business capacity as well
as improve the lives of employees. In the past three years, the Company has made many efforts
and been active in business activities as well as building and expanding production and business
activities in member companies. However, due to the prolonged stressful epidemic situation, the

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business performance of the company in general and the efficiency of the organization in using
capital in particular is still not really flexible. In the "new normal" period - living with the
epidemic, the whole company needs to unite, as well as the Board of Directors need to be more
discerning to be able to make the most appropriate decisions, try to overcome difficulties,
helping the Company to develop and grow as well as ensure the lives of employees in the
Company.

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