FINANCIAL ANALYSIS THANH CONG TEXTILE – INVESTMENT – TRADING JOINT STOCK COMPANY (TCG)

Distinctly, it is very noticeable that in the year 2020, Song Hong successfully eliminated all the non-current liabilities while Thanh Cong made an attempt to gradually reduce this figur

FINANCIAL ANALYSIS

THANH CONG TEXTILE – INVESTMENT –

TRADING JOINT STOCK COMPANY (TCG)

CF- T321WSB-3

Table of Contents

1 INTRODUCTION

3 ANALYSIS OF THE INCOME STATEMENT

4 RATIO ANALYSIS

4.1 Liquidity ratios

4.1.1 Current ratio

4.1.2 Quick ratio

4.1.3 Cash ratio

4.2 Efficient ratio

4.3 Long-term solvency ratios

4.3.1 Total debt ratio

4.3.2 Debt to Equity Ratio

4.3.3 Equity multiplier

4.3.4 Time interest earned ratio

4.3.5 Cash coverage ratio

4.4 Profitability ratios

4.4.1 Profit margin

4.4.2 Return on assets

4.4.3 Return on equity

4.5 Market value ratios

4.5.1 Earnings per share

4.5.2 P/E ratio

4.5.3 Market-to-book ratio

5 CONCLUSION

6 REFERENCES

1 INTRODUCTION

Company name: Thanh Cong Textile - Investment - Trading JointStock Company (TCG)

Telephone: (+84)3815.3962 - (+84)3815.3968Email: tcm@thanhcong.com.vn

Address: 36 Tay Thanh, Tay Thanh Ward, Tan Phu District, Ho ChiMinh City, Vietnam

Website: https://www.thanhcong.com.vn/

Thanh Cong company is one of the leading enterprises in the field of textile and garment in Vietnam The

company was established in 1976 and was taken over by the State and renamed as Thanh Cong Textile

Factory under the Union of Textile Enterprises - Ministry of Light Industry Its mission is to work for the

customers, the suppliers, the investors, and the employees by hard-working and continuous innovation

aiming to achieve substantial development

1.1 The company’s primary line(s) of business

The product lines of Thanh Cong diversify from weaving fabric, knitting fabric, rib, collar, and cuff to

chemicals, dyeing substances The company also provides the supplies and equipment dedicated to

textile and garment production Besides manufacturing and exporting these products, it also takes part in

real estate development projects such as residential buildings and resorts, supermarket operations, The

firm operates four yarn plants with a combined capacity of 21,000 tons per year and a textile factory with

a 7 million meter per year capacity A garment factory with a total capacity of 18 million goods per year

is also part of the firm The company's products mainly serve export markets in the US, Japan, Europe,

Korea and China Thanh Cong's growth goal is to concentrate on expanding its core textile-garment

industry while also enhancing production capacity and optimizing the present closed manufacturing

process Improve product manufacturing processes, worker productivity to boost production speed, and

existing research and development capacity to satisfy design and development needs for new goods all at

the same time accommodate the ever-changing demands of consumers

1.2 The company's independent (external) audit firm

Thanh Cong’s audit firm in 2018 and 2019 was Deloitte However, in 2020, it collaborated with PWC

Thanh Cong company was officially listed on the stock exchange of Ho Chi Minh City in October 2007

with the stock exchange code TCM From the day of the beginning, Thanh Cong has continuously

increased charter capital nearly 3 times in only 3 years, the dividends paid out every year fluctuating

from 10% to 15%

2 Mr Park Heung Su - Vice chairman of the board

3 Mr Lee Eun Hong - Member of the board

4 Mr Jung Sung Kwan - Member of the board

5 Ms Nguyen Minh Hao - Member of the board

6 Mr Nguyen Van Nghia - Member of the board

7 Mr Kim Il Kyu - Member of the board

8 Mr Kim Jong Gak - Independent member of the board

9 Mr Dinh Tan Tuong - Independent member of the board

10.Ms Huynh Thi Thu Sa - Secretary Of BOD

1 4 The company’s achievement

Through the operation period, Thanh Cong has many famous achievements, ranked in top 500 largest

companies in Vietnam and top 500 enterprises with the best growth in Vietnam

2 ANALYSIS OF THE BALANCE SHEET

THANH CONG - BALANCE SHEET

SONG HONG - BALANCE SHEET

respect to Thanh Cong, there was a little fluctuation starting from 1,893,146,267,570 VND in 2018, then

decreasing mildly 2.72% in the next year before reaching 1,783,900,889,021 VND in 2020 Conversely,

much more compared to its opponent (15% - 20%), and it also experienced an upward trend throughout

the period However, there is a contrast between two companies when it comes to the total long-term

assets In particular, Thanh Cong experienced a marginal rose of 2.72% in 2019 after the previous year

Nevertheless, the number significantly dropped the amount of 105,821,933,916 VND during the final

year of the period On the other hand, Song Hong non-current assets percentage indicates a downward

tendency Initiate the figure at 651,328,967 VND in 2018 then decline significantly to 625,290,224,260 in

the subsequent year and finally finish the period with a slight increase of 1,222,465,827 VND

Secondly, in terms of liabilities, it is clear from the above data that there is a quite similar pattern between Thanh Cong and Song Hong Both followed a slightly decreasing trend across the period of 2018

to 2020 Particularly, Thanh Cong’s total liabilities dropped by 9.45% in 2019 compared to the previous

year and this trend continued with a decline of 6.3% in 2020 The similarity of Song Hong's figures

indicates that there is also a decrease from 62.96% in 2018 to 45.12% in 2020 The financial status of

Thanh Cong improved over time as debt and financial leasing liabilities were reduced, cutting risks while

the world faced unanticipated changes that directly impacted the clothing sector in general and Thanh

Cong in particular However, the total liabilities were still lower than its competitor

The number of Thanh Cong’s current liabilities was moderately higher than the one of Song Hong Both values of the two corporations have a propensity to drop which means that they have higher

capacity to pay their debts on time In particular, the current liabilities of Thanh Cong began at

1,701,087,853,546 VND in 2018, fell to 1,331,355,715,842 VND in 2019, and continued slightly

decreased about 74 billion VND in the final year As regards Song Hong, the figures steadily reduced

from 1,485,759,651,787 VND in 2018 to 1,185,555,218,921 VND at the end of this period

Looking at non-current liabilities, there was a steady decline of Thanh Cong and its rival, Song Hong,over the given term Generally, both companies had a small proportion of non-current liabilities Distinctly, it

is very noticeable that in the year 2020, Song Hong successfully eliminated all the non-current liabilities while

Thanh Cong made an attempt to gradually reduce this figure In detail, the non-current liabilities rate of Thanh

Cong doubled Song Hong in 2018 (8.31% and 4.03% respectively) A year later, this ratio of Thanh Cong fell

to 5.69% and stopped at 2.71% in 2020 By having a downward trend of long-term liabilities, the business has

shown their capability to pay off debt On the other hand, with a lower starting point, Song Hong quickly

reduced this rate to 2.37% in 2019 and remarkably pushed it to 0% in 2020 This, hence, helped the company

to maintain its financial structure at a very safe level

Finally, contrary to total liabilities, the figures of either firms’ total stockholder's equity climbed steadily over the period of 3 years During the time, Thanh Cong stockholders’ equity grew slightly from

1,276,398,448,284 VND to 1,638,734,940,727 VND which accounting for 39,31% and 55,06% of total

liabilities and stockholder's equity In a similar pattern, the equity of stockholders of Song Hong also rose

gradually from 37,04% to 54,88% between 2018 and 2020 However, in terms of the money, the gap

3 ANALYSIS OF THE INCOME STATEMENT

THANH CONG – INCOME STATEMENT

Net revenue from

goods sold and

services rendered

Cost of goods sold

and services

rendered

Gross profit from

goods sold and

services rendered

Financial income

Financial expenses

Interest expenses

SONG HONG – INCOME STATEMENT

Profit from other

The following tables describe the variations between Thanh Cong and its competitor, Song Hong, based

on the income statements available for 2018, 2019, and 2020

Firstly, a look at the tables indicates that the net revenue from goods sold and services rendered by Song

Hong mildly surpassed Thanh Cong in terms of currency during the course From 2018 to 2019, the

percentage of Thanh Cong figures and its counterpart experienced only a slight change, but the pattern

went in contrast talking about the amount of money Despite the marginal drop in Thanh Cong

(17,810,675,994 VND), Song Hong encompassed a huge upward trend of 460,426,047,851 VND By

2020, either entity continued the decreasing path with the percentage over total sales staying the same for

Thanh Cong and falling by 0.11% for Song Hong

Secondly, for the Cost of goods sold and services rendered of Thanh Cong, there has been a spike by

Thirdly, when it comes to financial expenses, the figures witnessed a descending trend in both Thanh

Cong and Song Hong from 2018 to 2020 Regarding Thanh Cong, it reduced from 2.44% to 1.70% and

1.38% in the three-year course, respectively Subsequently, the selling expenses of both enterprises also

confront the similar pattern of fluctuation Specifically, Thanh Cong had quite unstable figures but

maintained to stay at 143,976,177,568 VND (179,157,591 VND in difference) after three years while its

opponent rocketed between 2018-2019 with 32,667,691,203 increased before the vast decline in the final

year Looking at general and administrative expenses, it is recognized that two companies saw different

directions over the period Thanh Cong had a downward trend from 6.28% to 4.09% and Song Hong

constituted a converse move with 4,57% up Finally, either company had an increasing tendency

regarding the amount of other expenses during 2018 to 2019 (Song Hong percentage remained

unchanged) However, there were two opposite directions for different firms, a massive collapse of

expenses in Thanh Cong (1,156,151,975 VND) and a considerable plunge of its counterpart

In terms of the research for the gains or losses of profits, Thanh Cong and Song Hong have a contrast in

net profit growth from 2018 to 2020 Thanh Cong statistics rose continuously between 2018 and 2020

from 6.78% to 9.80% at the same time Song Hong dropped exactly 4% Moving onto the category of

accounting profit before tax, Thanh Cong witnessed the decrease slightly from 2018 to 2019 with from

8.83% to 7.52% but it went up due to the increase of net profit in 2020 with 9.89%, while Song Hong

experienced a growth in accounting profit from 2018 to 2019 by 1% but it showed a decline in the next

year which decreased to 7.2% in 2020 In contrast, the development of accounting profit can affect net

profit after corporate income tax in which Thanh Cong despite the net profit is decreasing from 2018 to

2019 by 1.16% but it will return to growth in 2020 with it reaching 7.96% On other hand, Song Hong

showed a good result from 2018 to 2019 with growth from 9.36% to 10.20% but it fell significantly in the

next year to 6.07% in 2020

Finally, the difference between two firms in earning per share presents that Song Hong overall had a

higher and greater earning than Thanh Cong despite a decreasing sign every year Specifically, Song

Hong showed a gradual reduction every year but surprisingly contributed an abnormal fall in 2020 when

it was only 4.635 VND This drop implies the decrease in the company's value after the effect of

COVID19 On the other hand, Thanh Cong’s earnings per share illustrate a steady drop in two first years

but then grow to 3,775 VND in 2020 which reduces the distance with their competitor

The reason for the increase in profits of Thanh Cong before and after tax is that income from financial

activities increased by 37.96% year-on-year and financial expenses decreased by 22.61% In addition, in

2020 Thanh Cong increased productivity by streamlining the layout and use of machines and equipment

(for example, dyeing production was 14% higher than in 2019) Various solutions are being applied to

reduce production costs, such as reducing power costs and reducing raw material waste This has

improved the company's annual rate of return

In 2019, the company signed a Memorandum with Juki Singapore Group, a well-known group in sewing

sector to implement a smart factory project to increase productivity

and production capacity to add more product value by the brand owned by the company On average,

each production capacity increased by roughly 10% In October 2020, the Company increased its charter

capital to VND 620,683,490,000

4 RATIO ANALYSIS

4.1 Liquidity ratios:

4.1.1 Current ratio

The current ratio is used to measure a business's ability to pay its short-term liabilities with its short-term

assets, such as cash, accounts receivable, and inventory

= ( )

As the chart illustrates, Thanh Cong and its rival current ratios were both increasing over time and all

figures were exceeding 1 which demonstrate the high capability to pay off the short-term liabilities over 3

years Therefore, the risk of investing in both companies has decreased since their liquidity increased over

the time Regarding Thanh Cong, a slight reduction of both current assets and current liabilities made the

current ratio mildly increase from 1.11 to 1.22 by the end of 2019 In comparison, the current ratio of

Song Hong went up to 0.27 in the same duration In 2020, the current ratio of Thanh Cong went up 0.20

to reach 1.42 while Song Hong ratio grew only 0,16 Overall, we can clearly see that during the period of

3 years from 2018 to 2020, Song Hong's current ratio is higher than Thanh Cong's current ratio, about 0.1

to 0.3 depending on each year

4.1.2 Quick ratio

Quick ratio is a metric that measures a firm’s capacity to satisfy short-term obligations with its most

liquid assets By that, the quick ratio will omit the least liquid current asset that creates an overestimation

in sales and overbought or overproduced product which is inventory

Similar to the current ratio, the quick ratio of Thanh Cong is significantly lower than Song Hong figures

for 3 years and both are on an increasing trend With respect to Thanh Cong, the firm showed a slight

increase beginning from 0.44 (2018) to 0.55 and in 2020, this number has increased to 0.62 With the

figure that is less than 1, it is seemingly that Thanh Cong's available liquid assets could not cover all the

short-term obligations Besides, there is also a sign of excessive inventory which the company was

carrying On the other hand, Song Hong's quick ratio had a strong growth from 0.8 in 2018 jumped to

1.67 after two years which is such an excellent performance Thus, Song Hong possibly can cover its

current liabilities and maintain a better firm’s liquidity with stable financial health

4.1.3 Cash ratio

The cash ratio is an indicator of a company's liquidity which measures the ability of the business to pay

off current liabilities utilizing the company's total cash and cash equivalents

ℎ = ℎ ℎ ( )

Although the two liquidity ratios above demonstrate that Song Hong totally achieved a higher position than

Thanh Cong over three years, it turns a little bit converse when it comes to cash ratio In specific, Thanh

Cong's cash ratio experienced a fluctuation with an increase of 0,54 in 2019 after a previous year, which was