THANH THANH CONG TAY NINH JOIN STOCK COMPANY Student Team Report Ho Chi Minh, 10112021 BANKING UNIVERSITY – STUDENT RESEARCH Student Team Report Financial Sector, Financial Analysis HIGHLIGHTS From the perspective of investors, we issue a SELL recommendation on SBT The following factors warrant the SELL recommendation Sugar industry will begin reach equilibrium, price of sugar in the country decrease The begin competition with ThaiLand from 2018 Global sugar production and consumption will beg.
Trang 1THANH THANH CONG TAY NINH JOIN STOCK
COMPANY Student Team Report
Trang 2Ho Chi Minh, 10/11/2021
Trang 3BANKING UNIVERSITY – STUDENT RESEARCH
Student Team Report
Financial Sector, Financial Analysis
HIGHLIGHTS
From the perspective of investors, we issue a SELL recommendation on SBT The following factors warrant the SELL recommendation:
Sugar industry will begin reach equilibrium, price of sugar in the country decrease The begin competition with ThaiLand from 2018:
Global sugar production and consumption will begin reach equilibrium and the shortage of world sugar can finish, mainly is Europe (the third area have volume of sugar in the world) cancel quotas
The price of sugar in Viet Nam higher than 45 percent compared to Thai Land Sugarcane consumption in the production of the Viet Nam still high, sugarcane up 14 tonnes to produce 1 tonnes of sugar, while the rate of other country very low, in Thai Land only 8-9 tonnes sugarcane for 1 tonnes of sugar
With tends to decrease of the price in the world, the imported sugar is made and status of sugar smuggled, the price of sugar in the Viet Nam can continue to decrease
To participant in Trade in Goods Agreement in AEC, from 2018, import quotas of sugar in AEC was cancel, the sugar in Viet Nam will compete with Thai Land
The business profits change unreasonable, the decrease of the core operating profits and the significantly increase of the profits from financial: The profit
structure tends to change unreasonable when in 2016, the profits of company increase 134.647 million dongs, mainly is due to the increase of the profits from financial activities and it’s contribute to 48.38 percent in the profits structure
The financial structure tends to move more risky, reduced solvency The rate
of long-term equity finance for current assets decrease:
In 2014, long-term equity finance 49.29 percent for current assets However, in 2016, this rate decrease and only 24.64 percent
The ratio of interest coverage tends to decrease In 2014, 100 dongs interest will be secured by 325 dongs profits But at the end of 2016, 100 dongs interest only secured by 184 dongs profits, reduced by half
The rate of Z is the possibility of bankrupt despite of increasing from 2014 is 2.35 to 2.85 at the end 2016 but still lower than 2.99 It shows that the possibility of bankrupt of the company still many potential risks in the short- term
The rate average of ROE only reached 10 percent, lower than very much compare to the business same industry as well as in the markets and near equal the interest of bank.
Trang 47.00
6.00
5.00
4.00
3.00
2.00
1.00
.00
Figure 1: GDP Growth &
Inflation Rate
(2013-2016)
2013 2014 2015 2016
Inflation Rate (%) GDP Growth (%)
MACRO ANALYSIS.
The growth rate of GDP in Viet Nam from 2013 to 2015 increased steadily In
2013, GDP increased 5,42 percent, the economy has shown improvement, through recovery rate still slow, have not seen the real breakthrough The exit signal bottom of the economy has become clear with the good recovery of the manufacturing sector In 2015, GDP increased by 6.68 percent, breakthrough compared with 5.98 percent in 2014 and reached the highest level in the period from 2013 to 2016, the growth was promoted by the processing industry, manufacturing industry and mining In 2016, instead of being motivate of growth, the narrowing of the mining industry may be seemed as one of the main reasons why rate of the global economic growth reduced The GDP of 2016, increased by 6.21 percent lower the annual growth rate in 2015 The rate of economic growth of Viet Nam is predicted continue to slow down in 2017, and it is difficult to reach GDP growth target of 6.7 percent set by the Government cause the objectives of economic restructuring continue to be priority with focus on the equitization activities and listed state-own enterprise, and dealing with non-performing loans
Souce 1: World Bank
Souce2: General Statistics Office of VietNam
Figure 2: State Budget
Revenue and Expenditure
over
In 2013, the main objective of the Government and the State Bank of Viet Nam is
to stabilize the economy, control inflation, inflation rate only at level 6.04 percent in
2013 In the next years, inflation rate remain low and will have shown a tendency decrease, cause the Government’s efforts and the State Bank of Viet Nam to regulate money supplies and
300000
250000
200000
150000
100000
50000
0
the years
2013 2014 2015 2016 2017
7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
control prices The inflation rate in 2015 just increased 0.6 percent, the lowest in 15 years
In 2016, inflation rate increased 5 percent due to increasing prices of essential goods such as heath and education The price of essential goods in 2017 continues to be seemed
a factor affects global inflation when consumption is not really breakthrough The process
of prices about health services and education of the Government will strongly influence to the CPI
According to the State budget settlement in 2015, the state budget deficit is 263.135 billion VND, equivalent to 6.3 percent of nominal GDP, higher 16 percent compared to the estimate is 226.000 billion dong The estimate of budget deficit may be
up to 258.700 billion dong, accounting for 5.7 percent of GDP in 2016 This deficit is only 0.7
Budget Overspending (billion VNĐ)
Overspending (billion VNĐ)
Rate Of Overspending (%)
Source 1: Government
Source 2: General Statistics Office of VietNam
Figure 3: Sugar output in
the world
percent lower than the average of three years ago and much higher than the deficit for
2017 is estimated 4.2 percent of GDP According to estimate, the state budget deficit mainly decreased in 2017 due to changes estimation method as required by the new state budget law, not by spending cuts, so the deficit has reduced from over 230.000 billion dong to around 212.000 billion dong, accounting for 4.2 percent of GDP
SUGAR INDUSTRY ANALYSIS THE WORLD’S SUPPLY.
Over ten years, generally, the position of sugar industry has not changed much, Brazil, India, and EU still the three largest sugar producing regions in the world Upcoming 50,000
40,000
30,000
20,000
10,000
0
(million tonnes)
Brazil Thailand
Soure: USDA
Trang 5nds
,
the
sug
ar
ind
ust
ry
in
Bra
zil
has
a
spe
cial
adv
ant
age
in
nat
ure
so
the
ind
ust
ry
is
foc
use
d
on
dev
elo
pin
g
qui
te
sta
ble
The
sug
ar
ind
ust
ry
of
Ind
ia,
afte
r
goi
ng
do
wn
in
out
put
in
20
09/
20
10 season due to
the influence of dry
weather begin
redevelopment,
with much of the
driving force of
developing cause
the amount of
sugar consumption
in the country is
leading the world
while consumption
per person is still
low By the end of
September 2014,
when output quota
is cancelled, it is
expected that EU’s
sugar production
will increase
significantly,
consolidating the
position of the
world's third
largest sugar
producer China
tends to gradually
reduce its sugar
output due to labor
cost and the cost of
land taxes is high,
mechanization is
low, and higher
profits from other
agricultural
commodities will
restrict the
attractiveness of
sugar production,
makes the position
of sugar industry in
China from the
fourth to fifth in the
world, and give
place to Thailand in
2015/2016
Thailand has
significantly
increased sugar
output over ten
years, cause its
sugar subsidy
policies However,
by the end 2017,
this regulation will
be removed, this
may be a factor that reduces the growth rate of sugar output of the world’s fourth largest production
According to J.P Morgan, Bloomberg, and International Organizations for Standardization (ISO) forecast in 2016/2017 season, the sugar shortage continues to occur, the rate of inventory to consumption is low Specifically, the sugar output in the
Trang 6expectation oversupply
174,000
172,000
170,000
168,000
166,000
164,000
162,000
Figure 4: The total
consumption of in the
world (million tonnes)
Average Consumption
Consumption
23.4 23.2 23 22.8 22.6 22.4 22.2
world is forecast at 168.3 million tons, but still low compare to the demand of about 4.3 million tons Cause, output increase in Brazil and EU don’t make up for going down output in Indian Export are forecasted decrease to 57.77 million tons, as the sugar output
in the exporting countries and demand for sugar imports decrease as importers increase output domestic production
In 2017/2018 season, F.O Licht assumes that sugar output in the world can reach a record of 180 million tons, an increase of 9 percent comparing to 2015/2016 compare to 2015/2016 Therefore, sugar production andconsumption in the global will reach equalization and shortage period of sugar industry can finish To increase sugar output in the world, has expected factors below:
The recovery of output in Asian, EU cancel quota and Brazil
The weather won’t affect too much to sugar-cane output, radish in the countries and regions
The increase in area after the recent high of sugar price
THE WORLD’S DEMAND
Soure 1: USDA Soure 2: OECD
Figure 5: The average
consumption of sugar on average
per continent (kg/person)
45
40
35
30
25
20
15
10
5
0
Average Output Consumption 2016
Average Output Consumption 2019
Currently, sugar consumption in the global tends to steady-state growth Motivation comes from developing countries and less developed countries are also the leading regions about the proportion of sugar consumption in the global (78 percent) Population growth is the most important factor to increase sugar consumption in these regions The highlight comes from Asia and Africa are the two regions with the lowest average sugar consumption per capita compared to other regions, the high economic growth and the availability of domestic sugar more and more help sugar consumption in this regions to increase On the contrary, the sugar consumption demand in North America and EU can’t grow due to slow population growth, the average sugar consumption per capita is high and sweetener substitute for domestic sugar are available Some other areas such as Central America, South America and Caribbean have been stable in sugar consumption Currently, the concentrated distribution of the world population in Asia and Africa is 60 percent and 16 percent of the global population In the period 2016-2019, World Bank assumes that Asia and Africa will lead the population growth with 0.9 percent per year for Asia and 2.6 percent per year for Africa And the developed areas, in Europe, the population tends to decrease by 0.07 percent per year, in North America, the population growth rate is only 0.7 percent per year The growth of population will greatly affect to the amount of sugar consumption in the world Asia and Africa account for 76 percent of the global population are leading the population in the regions, helping to increase demand for sugar consumption in these regions This will create long-term growth potential for industry
THE WORLD’S PRICE
In 2016, in sugar prices tends to increase due to the expectation of sugar deficit
in 2016/2017 This is the second consecutive occur of sugar deficit after 5 years surplus However, from March 2017, sugar price in the world tends to decrease due to the
Figure 7: The retail price of sugar in the world
(cent/lb)
25
20
15
10
5
0
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8
expectation oversupply in 17/18 According to ISO, in case 17/18, sugar ouput in the world increase due to favorable weather along with increase output in EU after cancel quota While consumption is steadily rising due to population and per capita incomes in developing countries such as Asia and Africa foresee will continue to increase According to forecast of LMC and
Souce: https://tradingeconomics.com/commodity/sugar increase higher demand and sugar
price will decrease in 2017/2018 season
Trang 7SUMMARY PROCEDURE
press, diffuse
To deposit sedment and filter
Thicken sugar-cane juice
Centrifugal, dry out, split and create affination sugar
Clean sugar-cane lime disinfection
Boil sugar and crystalline
Raw sugar
Souce: FPTS Research
In general, sugar production procedure is quite simple, it doesn’t require much high technology, complicate Compared to the world, Vietnam has the same sugar production technology of sugar quality However, the scale and quality of the equipment
is inferior
Vietnam is ranked 14th in sugarcane area and sugar production Production scale
is quite small, the area account for 1.16 percent and sugar output account for 0.85 percent in the global The scale of Vietnam's sugar industry is only 16 percent of ThaiLand’s scale and quite similar to Philippines’s scale Vietnam's sugarcane productivity is limited, reaching only 65 tons/ha, lower than the world average of 68 tons/ha and major sugarcane producers such as Brazil (67 tonnes/ha), India Grade (70 tonnes/ha), China (70 tonnes/ha) and Thailand (77 tonnes/ ha)
AREA
Area of sugarcane (thousand ha)
Sugarcan
e Output (million tons)
Sugarcane Productivit
y (tons/ha)
Sugar Output (millio
n tons)
Sugar Productivit
y (tons/ha)
Tonnes of sugarcane/ tons of sugar
-Souce: World Bank
In addition, sugarcane consumption in Vietnam's sugar production is also very high, up to 14 tons to produce one ton of sugar, while in other countries this proportion is much lower, Thailand And Brazil is only 8-9 tons of sugarcane per ton of sugar
600
Trang 8400
300
200
100
0
Figure 9: Price (USD/Tonne)
Souce: USDA
Vietnam’s supply.
Vietnam has much higher sugar production costs than other countries in the world Specifically, the price of Vietnam sugar is 45 percent higher than Thailand and 72 percent of Brazil Due to three main reasons: high sugarcane production cost, sugar cane price in Thailand is only 600,000 VND / ton while sugarcane field price in Vietnam is from 900,000 to 1.2.200 VND / ton The conversion rate of sugarcane - sugar during processing is still high, which shows that Vietnam' s sugarcane quality is not high The average in Vietnam needs 14 tons ofsugarcane to produce 1 ton of sugar, on the contrary, Thailand is 9 tons and Brazil is 8 tons The scale of sugar mill in Viet Nam is still low and not yet reached the scale advantage, at present, there are only 13/41 factories (accounting for 61 percent of the total designing capacity) are qualify
According to the Vietnam Sugar Association (VSSA) estimates, in 2016/2017 harvest, domestic sugar output is 1,227 thousand tons, the inventory from the previous season is 311 thousand tons, and imports 119 thousand tons makes the total domestic sugar supply reached 1,677 thousand tons After balancing supply-demand, domestic sugar output is forecast 77,000 tons surplus
In the medium term, according to the draft about development planning of sugarcane of Ministry of Agriculture & Rural Development to 2020: By 2020, our country maintains four raw material areas of sugarcane is: the Central Highlands, the South Central Coast, the North Central Coast and the Mekong Delta The area of raw material area in the country increased 6 percent compared with 300 thousand hectares currently, productivity increased 8 tons per hectare to 72 tons per hectare Combine with an increase in the design capacity of the factory makes the expected of sugar output to reach 2 million tons, up 62% from the current From the above orientation, the industry will not increase much the area of sugar cane and new factory but focus on raw material planning, concentrate on forming large fields to facilitate in mechanization investment, and reinforce intensive farming to increase productivity and quality of sugar cane
Total area 284.000
300.000 ha
6%
300.000 ha
0%
In there, the raw material area focus
on 286,000 ha (accounting for 95%)
In there, the focus area is 296,800 hectares (99%
occupancy) Average
productivity of
Average of
Commercial Cane
Sugarcane
production millontonnes18,3 21,6 million tonnes 18% 24,0-25,0 million tonnes 13%
Sugar production 1,237
2 million tonnes
62%
2,7 million tonnes
35%
In there 1 million tonnes of raffinated sugar, white sugar and other sugars are 1 millionstonnes
In there, raffinated sugar is 1,6 millionstonnes, white sugar and other sugars are 1,1 millionstonnes
Total design
capacity 150.500 TMN
173.700 TMN
No more new sugar processing plants; Only focus on modernization
of equipment, technology, improve the capacity of sugar factories The press time in
Soure: MARD Proposed in Quarter III/2016
Trang 9times, sugar prices are also very high
VIETNAM’S DEMAND.
According to the Ministry of Industry and Trade, the total consumption of sugar usually fluctuate from 1.5 to 1.6 million tons per year in recent years In there, nearly 70 percent is used raw material for food and beverage and 30 percent is for direct consumption It is expected that by 2020, sugar consumption in Viet Nam will be 2 million tons per year, up 25 percent as currently The increase in consumption is due to: Vietnam's sugar consumption per capita is still low, according to the WHO, the sugar consumption per person per day in Vietnam is 46.5 grams lower than the safe consumption threshold is 50 grams per day According to the OECD, the consumption of sugar in Vietnam is 20.2 kg/personyear, lower than other Asian countries like Thailand:
37 kg/person/year, Cambodia: 31 kg/person/year, Indonesia: 21.7 kg/person/year and The world average: 21 kg/person/year; In the period 2016-2021, Vietnam's population
is forecasted to grow at an average rate of 0.98 percent per year (IMF) In the period 2016-2021, the average of GDP per person is forecasted to increase by 7.3 percent per year (IMF)
VIETNAM’S PRICE
Due to the import of sugar is frequently so domestic sugar prices are closely correlated with sugar prices in the world In 2014/2015 season, Viet Nam continues to experience net imports imports, the failure of sugar prices in the world are the reason for
a decrease in domestic sugar prices In addition, there are some periods in Viet Nam in the net exports position making domestic sugar prices is less changed according to the sugar prices in the world, maintaining high level cause the sugar production is already high in the country Typically, in 2012/2013 season, output production catch up and pass demand for sugar, this is the first time since 2001/2002 season, our country net exports
200 thousand tons of sugar Because it is unnecessary to import in the period despite falling sugar prices in the world but domestic sugar prices remain high-level
With six month production characteristics for consumption all year, domestic sugar prices also change seasonally In the non-productive months, the inventory of sugar from the previous season was sold, so sugar prices usually tends to increase follow inventory levels decrease to new season Moreover, the demand for seasonally sugar, the high consumption time in January and July and August due to the demand for confectionery production and beverage on Lunar New Year and Mid-Autumn Festival At
times, sugar prices are also very
25,000
20,000
15,000
10,000
5,000
0
Figure 10: Price (VNĐ)
1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8
high The domestic sugar prices
in 2015/2016 season increase again after four consecutive discount times At the end of the 2015/2016 season, due to anxious about decreasing of output production in the country, Ministry of Industry & Trade added quota for the
market was more stable and
Retail Price Wholesale price of raffinated sugar Wholesale of reducing sugar
Soure: Department of price management in Viet Nam.
sugar prices fell However, according to annual rule, by the end September 2016 is the time at the beginning of the new
season, the inventory of sugar still low so sugar prices increase again The sugar prices in 2015/2016 season have increased cause production cost increase due to rising prices of agricultural materials, the support costs of farmer and labor costs compare to 2014/2015 season In addition, sugar production in the country in 2015/2016 season decrease 13.2 percent compared to the previous season, not enough to increase the demand for consumption and the low of inventory
Trang 10As for sugar price in 2016/2017 season, the first season of sugar ouput is not much while the demand for sugar is very big to produce confectionery and beverage on Tet holiday so the sugar price increases until November However, the world sugar price