trinhbhmsb60440 vfm

8/13/2019 Trinhbhmsb60440 Vfm

1/13

FPT University

BUI HOANG MAI TRINH

SB60440

INDIVIDU L SSIGNMENTValuation and Financial ModelingDHG Company


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2 | P a g e E n r o n c o m p a n y

CONTENT

I . Executive ....................................................................................................................................... page 3

I I . Overview about DHG and medicine industry ............................................................................ page 3

I I .Val uation ...................................................................................................................................... page 4

I I I .Concl usion .................................................................................................................................. page 10

IV. References .................................................................................................................................. page 10


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This report provides an analysis and evaluation about the price of share for TCT and the comparion withother companies in the same industry( DMC,DBT,IMP,OPC)

There are some methods and models to evaluate the price of share for firm such as P/E, P/B and equity orfirm value/ Sales. Each of them has their own advantages and disadvantages. In this report, I will evaluate

this company in the two method: P/E and P/S.

I n P/E method:

To go the the last result, I calculated the following data: P/E ratio, Expected growth, Beta, Payout ratio and

Predicted P/E( I will clarify the method in the next part).

After calculating, I find out that The predicted P/E is lessthan The P/E ratio about 0.31. Therefore, I conclude

that DHC price is overvalued.

Moreover, calculating in the same method. I get the results about 4 companies in the same industry of DHG like

this: IMP is evaluated overvalued. Contrary to DMC, OPC and DBT, they are undervalued already.

I n P/S method:

I calculated the these data: P/S ratio, Net profit margin, Expected growth, Payout ratio and Predicted P/S( I will

clarify the method in the next part) in order to get the last result.

After calculating, it showed that The predicted P/S is more than The P/S ratio a small amount. Therefore, I

conclude that DHC price is undervalued.

I . Executive


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Moreover, calculating similarly to DHC situation. I get the results about 4 companies in the same industry of DHG

like this: OPC is evaluated overvalued. Contrary to IMP, DMC and DBT, they are undervalued already.

Medicine industry The Past

Until 6/2011, there were 103 factories producing medicine reaching GMP-WHO and Eroupe GMP, Japanese GMP

standards. Up to that time, it also made 919 million USD medicines.

The PresentNowadays, Vietnam producing medicine industry becomes more and more developt and has a lot of advantages in

comparision with others in the area. According to BMI, medicine industry made up to 1.5% GDP. Annual revenueof the whole industry is about 1.11 billion USD, makes up 1.59% GDP. Athought this industry has a smaller sizethan other industries, it is still the one which has fastest growth rate recently.

On the other hand, the medicine which is produced in Vietnam making up about 50% medicine market, but it is upto 90% material imported. We can see that Vietnam medicine industry is mainly about producing medicine simply.

The FutureVietnam medicine industry completely can developt more and more if it applies some more modern techniques inproducing and exploit all the potential market.

DHG company Company name: Hau Giang pharmaceutical joint-stock company Abbreviate name: DHG PHARMA Business sector: Producing medicine, food medicine and cosmetic. History

Set up date: 02/9/1974 with the the first name is Medicine enterprise 2/9.

Joint stock date: 21/12/2006, with 8.000.000 shares on HOSE.

I I . Overview


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Position:DHG is one of the best company in the whole industry which rated in the fourth level among all of the medicine

producers.(According to IMS 2010).Revenue of DHG also increases much and always keep the leader position in this kind of industry.

P/E ratio:Firstly, I collected Net Income data of 5 companies( DHG, DMC,DBT,IMP,OPC) in 5 years_ from 2008 to 2012.

Secondly, I relied on the fincial reports of these companies form 2008 to 2012 in order to get the number of shares

outstanding _ all of them is shares that companies registered to issue.

Then, I let Net income devided by numbers of share to have EPS. Lastly, EPS is averaged. And this is the result

Average EPS

DHG 9,684.85

DMC 4,611.18

DBT 3,730.83

IMP 5,405.97

OPC 4,892.01

I I I .Valuation


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Moreover, I also get the price of these shares on in December,2012( The data is got on cafef.vn)

Date Price

DHG Dec-12 70,300

DMC Dec-12 28,300

DBT Dec-12 16,400

IMP Dec-12 34,200

OPC Dec-12 37,400

And in order to find out the P/E ratio, I let Price devided by Average EPS

P/E

DHG 7.26

DMC 6.14

DBT 4.40

IMP 6.33

OPC 7.65


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Expected growth:Depending on the Net Income over years. I calculated the growth rate of it.

Net Income2012 2011 2010 2009 2008

DHG 491,292,801,008 419,762,158,583 383,335,234,331 362,340,382,334 129,994,593,623

g 17.04% 9.50% 5.79% 178.73%

DMC 90,123,792,655 80,103,348,441 82,791,634,722 76,362,466,059 62,805,354,885

g 12.51% -3.25% 8.42% 21.59%

DBT 13,325,394,403 13,226,886,844 12,582,263,388 7,178,773,058 9,649,144,075

g 0.74% 5.12% 75.27% -25.60%

IMP 77,613,706,411 77,606,045,576 80,465,662,197 65,706,720,938 58,265,654,856

g 0.01% -3.55% 22.46% 12.77%

OPC 55,744,903,479 50,476,661,494 50,522,119,317 49,392,620,075 31,251,448,534

g 10.44% -0.09% 2.29% 58.05%


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Next, I averaged them.

Average growth rate

DHG

Average g 52.77%DMC

Average g 9.82%

DBT

Average g 13.88%

IMP

Average g 7.92%

OPC

Average g 17.67%

In my opinion and according the the growth rate of net income through years. I think the growth rate of them will

be in the following rate. I think we should eliminate some strange factor( large increase or larg decrease) over years

to get the most suitable rate. The followin growth rate also depends in the current business situation of Medicine

sector in Vietnam( It cannot have the significant growth rate. In some years latter, it is suitable to have a stable or

slight increase in growth rate).


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Expected growth rate

DHG

Expected

g 11.00%

DMC

Expected

g 9.82%

DBT

Expected

g 6.00%

IMP

Expected

g 4.00%OPC

Expected

g 9.00%

Beta:According the VN-Index rate, the Price of these stock, their dividend by cash, devidend by share, we can calculate

the Beta. This is my result

Beta

DHG DMC DBT IMP OPC

0.46 1.00 0.13 0.42 0.66


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Payout ratio:I collected the data about these companies History give dividend on cafef.vn in order to calculate the dividend

per share by multiplied %dividend with the face value on Vietnam stock market( = 10,000 VND). And then

average them:

Average DPS

DHG 2,500.00

DMC 1,980.00

DBT 1,400.00

IMP 2,320.00

OPC 1,500.00

Then Average DPS divided by average EPS, we has payout ratio:

Payout Ratio

DHG 25.81%

DMC 42.94%

DBT 37.53%

IMP 42.92%

OPC 30.66%


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With all of above data, we use regression to get the Predicted P/E:

Company P/E Ratio Expected growth Beta Payout ratio Predicted PE Under/Overvalued

DHG 7.26 11.00% 0.46 25.81% 6.95 Overvalued

DMC 6.14 9.82% 1.00 42.94% 6.15 UndervaluedDBT 4.40 6.00% 0.13 37.53% 4.63 Undervalued

IMP 6.33 4.00% 0.42 42.92% 6.06 Overvalued

OPC 7.65 9.00% 0.66 30.66% 7.97 Undervalued

Note: All of the above data, we use their average figure, because I want to estimate them in the long period,not in a short time.

P/S ratio:

Similar to P/E ratio, we also calculate PS ratio, net profit margin, payout ratio, growth rate and Prdicted PS .

Firsly, I collected their Revernue from 2008 to 2012, and then average them. After that in order to calculate the

Sales per share, I let the number of shares divided by the average Reveue.

Sales per share

DHG 52,424.38

DMC 53,856.57DBT 159,429.09

IMP 52,897.80

OPC 37,367.35


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Finally, the price divided by the Sales per share equals to PS ratio:

PS

DHG 1.34

DMC 0.53

DBT 0.10

IMP 0.65

OPC 1.00

Let Average EPS/ sales per share, we got net profit margin. And DPS/ EPS, we got payout ratio. Like this:

Net

profit

margin

Payout

ratio

18.47% 25.81%

8.56% 42.94%

2.34% 37.53%

10.22% 42.92%13.09% 30.66%


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Finally, I use regression to get the predicted PS:

Company PS ratio Net profit margin Payout ratio Growth Predicted PS Under/Overvalued

DHG 1.34098 18.47% 25.81% 11.00% 1.37397 Undervalued

DMC 0.53 8.56% 42.94% 9.82% 0.52587 UndervaluedDBT 0.10 2.34% 37.53% 6.00% 0.11811 Undervalued

IMP 0.65 10.22% 42.92% 4.00% 0.65064 Undervalued

OPC 1.00 13.09% 30.66% 9.00% 0.94813 Overvalued

I prefer the second method_ P/S method to evaluate the price of share for DHG. The explaination for this could be:

The sector which DHG trades in is producingmedicine, so the sales may affect much to its business flow or even

price share. The second explaination is that when doing regression for P/S method, I got low level of standard

error_ about 0.06. Therefore, I believe this method will give a quite accurate result.

http://cafef.vn/http://www.cophieu68.vn/

http://www.dhgpharma.com.vn/dhg/

And

Financial report of DHG, DMC,DBT,IMP,OPC from 2008 to 2012

The End

I V.Conclusion

V. References
http://cafef.vn/http://cafef.vn/http://www.cophieu68.vn/http://www.cophieu68.vn/http://www.dhgpharma.com.vn/dhg/http://www.dhgpharma.com.vn/dhg/http://www.dhgpharma.com.vn/dhg/http://www.cophieu68.vn/http://cafef.vn/

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