INTRODUCTION
The history of the establishment
- Da Nang Rubber Joint Stock Company was established in 2005, according to Decision No 320/QD/TCNSĐT dated May 26, 1993 of the Ministry of Heavy Industry
- On October 10, 2005, according to Decision No 321/QD – TBCN of the Minister of Industry, Da Nang Rubber Company was transformed into Da Nang Rubber Joint Stock Company
The company, listed under the stock code DRC, began trading on the Ho Chi Minh City Stock Exchange on December 29, 2006 The consulting organization for this listing was Vietnam Bank for Industry and Trade Securities Co., Ltd., while the independent auditor was the Auditing and Informatics Service Company – Central Branch.
Auditing organizatio
- AASC Auditing Firm Company Limited – 2019-2020
- AAC Auditing And Accounting Company – 2021-2022.
Businesses
DRC specializes in the manufacturing of tubes and tires for motorcycles, bicycles, trucks, and specialized vehicles The company also engages in the production, trading, and installation of rubber industry equipment Additionally, DRC is involved in commerce, real estate, and the leasing of land use rights, whether owned, user-occupied, or leased Furthermore, DRC provides leasing services for various machinery, equipment, and tangible goods.
Current size of the company
As of 2022, Da Nang Rubber Joint Stock Company is recognized as a large-scale enterprise, boasting a total capital of 2,417,799,000,000 VND and a charter capital of 1,187,926,050,000 VND The company employs 1,283 direct employees and has an additional 281 indirect employees.
The Board of Directors
- Chairman of the Board of Directors: Mr Nguyen Xuan Bac
The Board of Directors comprises esteemed members including Mr Nguyen Huy Hieu, Mr Tran Dinh Quyen, Mr Ha Phuoc Loc, Ms Nguyen Thi Bich Thuy, Mr Nguyen Van Hieu, and Mr Le Hoang Khanh Nhut.
The Board of Directors is responsible for determining the business development plan and annual budget, as well as establishing operational goals aligned with the strategic objectives approved by the General Meeting of Shareholders.
Competitors
DRC faces significant competition from various manufacturers, including Casumina, which focuses on motorcycle and light truck tires, and SRC, known for bicycle tires In the domestic market, DRC competes not only with local companies like CSM and SRC but also with foreign direct investment (FDI) firms such as Bridgestone, Kumho Tire, Michelin, and Hankook, particularly in the automotive sector, including commercial tires and tubes Additionally, the influx of low-cost tires and tubes from Chinese enterprises intensifies the competitive landscape in Vietnam.
BUSINESS ENVIRONMENT ANALYSIS
Industry analysis
Tires are the sole component of a vehicle that directly contacts the road, supporting the entire weight of the car They play a crucial role in transferring engine traction to the road, enhancing vehicle movement, providing flexibility, and minimizing vibrations from the road surface Consequently, tire quality significantly impacts a car's performance, safety, fuel efficiency, and overall driving comfort Notably, 85% of global tire production is dedicated to the automotive sector, with only 15% allocated to specialized industries, including aircraft tires.
3 tires, and agricultural tires Therefore, it can be seen that fluctuations in the automotive industry will directly affect the demand for tire and tubes
Benefit from the recovery of the automotive industry and the economy after the Covid 19 pandemic
Automobile production is greatly affected by the health of the economy In the period 2010-2018, global GDP had an average growth rate of 3.2%; automobile production reached a CAGR of 2.7% (Figure 1)
Figure 1: Global car production (Million unit) and GDP Growth
When the world economy was heavily affected by the Covid-19 pandemic in the period 20192020, the world GDP growth rate slowed from 3.3% in 2018 to -3.3% in 2020
During the implementation of closed economies, incomes declined, leading to reduced consumer spending and significant cuts in non-essential purchases like automobiles Consequently, global car production fell by 19%, dropping from 96 million units in 2018 to 77 million in 2020 As the world economy began to recover in 2021 with a global GDP growth of 5.8% YOY, car production rebounded to 80 million units, reflecting a 3% increase However, the IMF forecasts lower GDP growth rates of 3.2% for 2022 and 2.9% for 2023, attributed to concerns over war and inflation driven by high raw material costs Thus, while car and tire production and consumption may rise, the growth rate is expected to be lower than that of the 2010-2018 period.
Developing markets and China will be the growth engine for the automotive industry in the future
GDP per capita and the number of cars per 1000 population are positively correlated
(Figure 2), markets with high GDP per capita tend to have higher car ownership rates than lower GDP markets
Figure 2: GDP per Capital (Current USD) and Number of cars/1000 people
As GDP per capita rises, car ownership growth tends to slow down, indicating a move towards saturation, particularly in developed markets where ownership rates exceed 500 cars per 1,000 people, such as the U.S with 888 cars per 1,000 people Conversely, regions with low GDP per capita exhibit significant growth potential in car ownership, driven by increasing financial capacity among residents While developed countries experience stability and saturation in their auto markets, with demand primarily for replacement vehicles, developing regions, especially China, are witnessing a shift in automobile production and consumption In 2020, as North America and Europe faced declines in car production and consumption, the markets in China and Asia remained relatively stable, providing a vital growth impetus for the global automotive industry during challenging times.
Figure 3: Cars sale by region
Domestic tire industry: Motorcycle and bicycle tires are in the saturation stage, and auto tires will be the main growth drivers of Vietnam’s tire industry
Vietnamese tire companies currently dominate the domestic bicycle tire market, facing minimal competition from lower-quality Chinese products However, the bicycle tire market is nearing saturation, with growth potential dwindling as motorcycles and cars rapidly replace bicycles Similarly, the motorcycle tire market in Vietnam has not seen significant fluctuations in sales between 2016 and 2019, despite the country's robust GDP growth during that period.
Figure 4: Sale of motorcycle in Vietnam
During the COVID-19 pandemic in 2020 and 2021, motorcycle sales in Vietnam experienced significant declines of 17.1% and 7.7% year-over-year Additionally, the Vietnamese government plans to limit or phase out motorbikes in the five largest cities by 2030, indicating that the motorcycle market is entering a saturation phase Consequently, we anticipate that original equipment manufacturer (OEM) demand for motorcycle tires will decline in the future, while the demand for replacement tires is expected to remain stable.
Vietnam is experiencing significant growth in the automobile market, distinguishing itself from motorbikes and bicycles in Southeast Asia Between 2015 and 2021, the compound annual growth rate (CAGR) of auto sales reached 3.7% Additionally, the number of cars per 1,000 people is on the rise, indicating a shift towards increased vehicle ownership in the country.
In 2021, Vietnam's GDP growth rate was 46, with expectations for further increases as the economy recovers from the pandemic The World Bank forecasts a growth rate of 7.5% for 2022 Additionally, the percentage of the Vietnamese population classified as middle class is on the rise, increasing from 7.46%.
Between 2010 and 2020, the population in Vietnam increased to 22.27%, highlighting significant customer groups that drive car sales Consequently, the demand for both OEM and replacement auto tires is anticipated to be a key growth area in Vietnam's tire industry moving forward.
Figure 6: Vietnam population class (Million)
Figure 7: Car sale of Vietnam (Unit)
The trend of radial tires will be the inevitable trend in the world and Vietnam
The global demand for radial tires is surging, driven by advancements in transportation systems, particularly in developing countries, which have highlighted the benefits of radial tires over bias tires As of 2019, radial tire usage reached 100% in Western Europe and 96% in North America, while Africa and the Middle East stood at 72% In the Asia Pacific region, the shift from bias to radial tires is gaining momentum, with the current consumption split at 52% for radial tires and 48% for bias tires This ratio is expected to increase in the near future, fueled by economic growth and infrastructure development, presenting significant opportunities for radial tire manufacturers.
Vietnam currently has a total expressway length of only 1,163 km, with just 64% of the national highway network paved with asphalt Over 90% of national highways are classified at technical levels III and IV, leading drivers to prefer Bias tires for their better puncture resistance on rough terrain, while Radial tires are more effective on flat surfaces Consequently, the usage rate of Radial tires in Vietnam remains lower than in regions with advanced infrastructure, such as North America, Western Europe, and particularly China, where Radial tire usage reached 95% in 2019 From 2005 to 2019, China's consumption rate of Radial tires increased from 57% to 95% as road quality, especially highways, improved It is anticipated that as Vietnam's road quality enhances post-2025, the trend towards Radial tire usage will become more pronounced, mirroring China's experience.
Tire products from FDI and imported enterprises increase pressure on domestic tire companies
The automobile tire manufacturing industry in Vietnam exhibits a distinct separation between foreign direct investment (FDI) enterprises and domestic companies Currently, FDI enterprises primarily focus on exporting their tire products, while they hold over 80% of the domestic market share for radial tires used in cars and trucks In contrast, domestic enterprises have a relatively modest production capacity for radial car tires compared to their FDI counterparts.
Investing in tire production requires substantial fixed assets, as demonstrated by the DRC and CSM projects, which, despite their trillions VND investment, can only manufacture a limited range of tire models This modest output pales in comparison to billion-dollar factories like Bridgestone and Kumho, leading to a less competitive product portfolio for Vietnamese tire manufacturers Currently, while most radial car tires produced by foreign direct investment (FDI) enterprises are focused on exports, a significant rise in domestic demand is anticipated Consequently, these enterprises are poised to enhance their product offerings and distribution networks in Vietnam, intensifying competitive pressures on local tire companies.
Figure 9: Domestic truck tire market share
SWOT analysis
The auto tire market in Vietnam holds the largest market share in the country, backed by a long-standing reputation It is the first and only company in Vietnam and Southeast Asia to successfully manufacture solid tires designed for super-heavy loads The company supplies its products to major automotive assembly enterprises, including TMT, Truong Hai, and Hyundai Additionally, it has established a robust nationwide distribution network, with distributors in countries such as Laos, Malaysia, Singapore, Pakistan, Brazil, and the USA Committed to environmental sustainability, the company utilizes advanced equipment for waste management, ensuring that most scrap materials are recycled and minimizing waste production.
10 o Located in an area with a strongly developed industry and service industry
Da Nang city serves as a significant consumption market for the company, bolstered by a management team with extensive experience and a highly qualified staff Additionally, the imposition of export taxes on Chinese auto tires in Brazil enhances DRC's competitive edge in this market.
DRC's competitiveness in car tire pricing remains weak, as its auto tubes and tires struggle to match the quality and design variety of products from foreign direct investment (FDI) enterprises and imported alternatives While the radial auto tire market presents significant opportunities for the tire industry, DRC has primarily concentrated on developing radial tires for trucks and specialized vehicles, limiting its ability to compete effectively in this lucrative segment.
Vietnam's involvement in global economic organizations is set to create an innovative economic environment, boosting tire demand and enabling DRC to broaden its export market Additionally, the rising consumption of tires and the shift from bias to radial tires in both domestic and developing markets present significant opportunities for DRC to enhance revenue and expand its business operations.
- Threat o Affected by fluctuations in input material prices o The risk of being more and more fierce competition by large FDI enterprises or China if they promote business in Vietnam.
BALANCE SHEET ANALYSIS
The amount of total assets
Figure 10: Total assets of DRC 2020-2022
The tire industry, particularly DRC, faced significant challenges from 2020 to 2021, especially in the third quarter of 2021 due to a disease outbreak in the South, which led to a decline in domestic consumption and increased input costs, negatively impacting profit margins Despite these fluctuations, DRC's total assets rose by 29.01% year-over-year, increasing from 2,430 billion VND to 3,136 billion VND by December 31, 2021 Looking ahead to 2022, the tire industry continues to grapple with rising input material and logistics costs, which adversely affect gross profit margins Nevertheless, DRC's business performance remains robust, buoyed by a recovery in export volumes driven by post-pandemic economic growth.
% of assets % of assets % of assets (+/-) (%) (+/-) (%)
TOTAL ASSETS 2,430,709,559,391 100.00% 3,135,943,084,235 100.00% 3,417,798,778,419 100.00% 705,233,524,844 29.01% 281,855,694,184 8.99% Current assets 1,311,509,477,072 53.96% 2,114,195,151,163 67.42% 2,457,425,816,063 71.90% 802,685,674,091 61.20% 343,230,664,900 16.23% Cash and cash equivalents 188,810,249,299 7.77% 89,621,165,826 2.86% 155,305,504,390 4.54% -99,189,083,473 -52.53% 65,684,338,564 73.29% Short-term financial investment 150,000,000,000 6.17% 320,000,000,000 10.20% 210,000,000,000 6.14% 170,000,000,000 113.33% -110,000,000,000 -34.38% Short-term receivables 131,027,127,773 5.39% 208,132,201,825 6.64% 257,142,204,794 7.52% 77,105,074,052 58.85% 49,010,002,969 23.55% Inventories 787,954,880,563 32.42% 1,429,218,154,245 45.58% 1,707,695,276,561 49.96% 641,263,273,682 81.38% 278,477,122,316 19.48% Other current assets 53,717,219,437 2.21% 67,223,629,267 2.14% 127,282,830,318 3.72% 13,506,409,830 25.14% 60,059,201,051 89.34%
Long-term assets in process 86,922,720 0.00% 235,138,571 0.01% 11,628,344,170 0.34% 148,215,851 170.51% 11,393,205,599 4845.32% Long-term financial investment 3,849,602,111 0.16% 4,139,216,813 0.13% 4,390,106,264 0.13% 289,614,702 7.52% 250,889,451 6.06% Other non-current assets 51,252,387,944 2.11% 41,375,805,395 1.32% 43,115,231,241 1.26% -9,876,582,549 -19.27% 1,739,425,846 4.20%
Current liabilities 742,184,476,097 30.53% 1,359,992,836,134 43.37% 1,506,929,882,468 44.09% 617,808,360,037 83.24% 146,937,046,334 10.80% Non-current liabilites 1,232,295,121 0.05% 2,019,748,757 0.06% 1,105,975,000 0.03% 787,453,636 63.90% -913,773,757 -45.24%
OWNER'S EQUITY 1,687,292,788,173 69.42% 1,773,930,499,344 56.57% 1,909,762,920,951 78.57% 86,637,711,171 5.13% 135,832,421,607 7.66% TOTAL LIABILITIES AND OWNER'S EQUITY 2,430,709,559,391 100.00% 3,135,943,084,235 100.00% 3,417,798,778,419 100.00% 705,233,524,844 29.01% 281,855,694,184 8.99%
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12 needs of countries around the world As of December 31, 2022, the total assets of DRC increased by 8.99% over the same period last year, from 3,136 billion VND to 3,418 billion VND
Figure 11: Total assets of DRC and Peer 2020-2022
In general, in the period of 2020-2022, CSM has the highest total assets among the
3 firms in the Vietnamese tire industry
- The amount of total current assets
Figure 12: Current assets of DRC 2020-2022
In general, total short-term assets increased over the years from 2020 to 2022 In
In 2021, total short-term assets rose by 802.7 billion VND, marking a significant increase of 61.20%, primarily driven by inventory, which constituted 45.58% of the total and surged by 81.83% By 2022, total assets continued to grow, increasing by 343.2 billion VND, equivalent to a 16.23% rise.
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13 current assets played a major role in contributing to the increase in total short-term assets, other current assets accounted for 3.72% and increased by 89.34%
- The amount total non-current assets
Figure 13: Non current assets of DRC 2020-2022
From 2020 to 2022, total long-term assets experienced a general decline In 2021 alone, there was a significant reduction of 97.5 billion VND, representing an 8.71% decrease This decline was primarily attributed to other long-term assets, which constituted 1.32% of the total and saw a notable decrease of 19.27%.
2022 decreased by 61.4 billion VND (equivalent to a decrease of 6.01%) Fixed assets contributed mainly to the decline in long-term assets in 2022 when fixed assets had a weight of 26.35% and decreased by 7.68%.
The amount of total liabitilies
In 2021, DRC's liabilities surged by 618.6 billion VND, marking an 83.21% increase In 2022, liabilities are expected to rise by an additional 147 billion VND, reflecting a 10.72% growth The ratio of liabilities slightly increased from 43.43% in 2021 to 44.12% in 2022, primarily driven by a significant rise in short-term debt DRC's capital structure indicates that short-term debt accounted for 44.09% in 2022, while long-term debt constituted a mere 0.03% Notably, short-term debt is projected to increase by 148 billion VND in 2022, representing a 10.9% rise.
- The amount of total current liabilities
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Figure 14: Current liabilities of DRC 2020-2022
In 2021, DRC's short-term debt surged by 617.8 billion VND, marking an 83.24% increase In 2022, this debt rose modestly by 10.8% (about 147 billion VND), with its share of total capital increasing from 43.37% to 44.09% The primary drivers of this change were trade payables and short-term borrowings, with trade payables accounting for approximately 14% of total capital at the end of 2022, reflecting a 16.07% increase (around 65 billion VND) Short-term loans represented 20.08% of the debt in 2022, contributing to a 19.94% increase.
- The amount of total non-current liabilities
Figure 15: Non-current liabilities of DRC 2020-2022
As shown in the overview of liabilities of DRC, the ratio of long-term debt to total capital is 0.06% in 2021, gradually decreasing just 1 year later to 0.03%, corresponding to
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15 a decrease of 45.24% (approximately 914 million VND) This is considered a safe debt ratio for DRC.
The amount of total stockholders’ equity
Figure 16: Total equity of DRC 2020-2022
In general, in the past 1 year, the volatility of DRC’s equity was positive and promising In 2021, equity will increase by VND 86.6 billion (equivalent to an increase of
5.13%) At the end of 2022, an increase of 7.66% (approximately 136 billion VND) was recorded, the main contribution to the increase rate was an increase in the setting up of the
The Development Investment Fund experienced an increase in Undistributed Interest; however, it's noteworthy that the contribution ratio decreased Specifically, the equity-to-total capital ratio at the end of 2021 and 2022 reflects this decline.
After the Covid-19 pandemic, DRC is showing a gradually positive financial outlook, with equity growth of 56.57% and liabilities growth of 78.57% This indicates that while equity is increasing, it is doing so at a slower rate than liabilities To support its future projects, DRC is also preparing short-term loans for the upcoming Radial Phase III project.
INCOME STATEMENT ANALYSIS
Net Revenue
Net revenue represents a company's total earnings after accounting for all sales-related expenses, including returns, rebates, and promotions It is important to note that deductions for product sales and typical expenditures, such as administrative costs, are not factored into net sales.
As indicated in the table above, the company’s net sales experienced constant growth in three years (from 2020 to 2022), from 3,646,641,131,561 (2020) to 4,379,518,236,174
(2021), and increased sharply to 4,898,587,722,919 in 2022 The increase in net income shows that the company overcame the outbreak of Coronavirus in 2019 It is evident that
Danang Rubber Company is doing quite well, has visible growth, and is moving toward development, providing numerous chances for study, investment, and borrowing
Figure 17: Total revenue of DRC and Peer 2020-2022
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In general, in the period of 2020-2022, CSM has the highest total revenue among the 3 firms in the Vietnamese tire industry.
Cost of Goods Sold (COGS)
The company's cost of goods sold (COGS) tends to rise over time alongside net revenue, reflecting the growth in net sales and overall company size Increased input costs, including raw materials and labor, contribute to higher COGS Despite these challenges, the company successfully maintains stable net sales growth, which is sufficient to cover COGS, demonstrating effective cost and expense management.
Expenses (before income taxes)
Over a three-year period, the company experienced significant fluctuations in financial expenses, particularly in interest expenses In 2021, interest expenses decreased from –20,188,994,945 to –9,234,767,876, resulting in a total reduction of financial expenses from –67,881,320,205 to –51,017,528,139 However, in 2022, the company faced an increase in interest expenses, rising by –41,232,811,780.
The company has significantly increased its selling expenses from 165,424,975,517 in 2020 to 318,162,074,032 in 2022, mirroring a similar rise in general and administrative expenses Notably, selling costs consistently represent nearly double the amount of general and administrative expenses, which is expected due to higher costs in promotion, transit, and other sales-related purchases This growing disparity indicates that the company has yet to effectively manage its sales and administrative expenses.
Overall, the company has managed its expenses quite well and therefore, the firm still earns a profit from its business
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Earning per common share (EPS)
The company's earnings per share (EPS) have shown a positive trend over the past three years, with a notable increase of 290, rising from 2,158 in 2020 to 2,448 in 2021 Additionally, there was a slight growth of 138 in EPS in 2022, indicating that the business is profitable enough to provide stockholders with higher dividend payments.
CASH FLOW STATEMENT ANALYSIS
Cash flow from operating activities
In 2022, the company experienced significant revenue growth, with proceeds from sales and services rising to 4,777,470,439,265, up from 4,354,187,696,992 in 2021 This growth reflects the company's expansion, necessitating an increase in employee payments and hiring Additionally, the rise in cash paid to suppliers has contributed to the overall increase in revenue from sales and services.
Between 2020 and 2022, the company's interest expenditure experienced significant fluctuations Notably, in 2021, interest payments sharply decreased from $20,529,836,312 in 2020 to $9,004,347,836, indicating a substantial reduction in interest obligations compared to the previous year.
In contrast, the interest payment witnessed a dramatic increase from –9,004,347,836 to –
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In 2022, the total expenditure for enterprise income tax saw a notable decline to –68,225,061,237, following a significant increase from –64,233,288,628 in 2020 to –88,519,641,643 in 2021 Additionally, while the funds allocated for other operating activities have consistently decreased, the revenue from other operating activities has shown fluctuations throughout the year.
Despite experiencing a negative net cash flow of -67,813,289,012 from operating activities in 2021, the company achieved a positive cash flow of 28,378,589,952 in 2022 This indicates a significant recovery, as operating activities across enterprises have generally improved in 2022 compared to previous years.
Cash flow from investing activities
The rise in spending on fixed assets and long-term investments over three years indicates the company's potential for growth Investing in these assets is justified when they can be leveraged to enhance capacity and drive expansion.
The Democratic Republic of Congo (DRC) focuses on the production and distribution of tubes and tires for bicycles, motorcycles, cars, and rubber goods, making investments in fixed assets for machinery a financially sound decision.
Year-on-year expenditures on loans and debt instruments have risen dramatically, increasing from –234 billion in 2020 to –740 billion in 2022 Additionally, proceeds from the disposal of fixed and long-term assets, as well as from lending or repurchasing debt instruments, are projected to surge in 2022 Consequently, the net cash flow from investing activities will show a significant positive cash inflow, jumping from –173 billion in 2021 to 120 billion in 2022.
Cash flow from financing activities
In 2021, the company experienced a positive net cash flow; however, in 2022, it faced a significant negative net cash flow of –83,385,439,416 This decline was primarily attributed to an increase in principal repayments, which rose from –3,742,915,867,180 to –3,946,407,452,168.
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22 financial lease (from –669,946,364 to –1,337,921,364), and dividends and profits paid to owners (from –118,792,603,100 to –201,947,425,270)
In summary, although the company currently experiences a negative net cash flow from financing activities, we anticipate a decline in its financial performance over time Additionally, the business has utilized bank loans to acquire and invest in fixed assets and other long-term assets.
FINANCIAL RATIO ANALYSIS
Liquidity Ratios
Figure 1818: Current ratio of DRC and Peer
The current ratio assesses a company's capacity to meet its short-term liabilities, specifically those due within a year DRC's ratio, which is marginally above the industry average, is deemed acceptable and suggests that the company possesses sufficient financial resources to maintain short-term solvency.
DRC CSM SRC Peer average
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Figure 1919: Quick ratio of DRC and Peer
The quick ratio assesses a company's ability to meet its current liabilities without relying on inventory sales or additional financing In 2020, three companies exhibited significantly different quick ratios, but after two years, their performances converged This trend indicates a decline in their quick ratios, highlighting the challenges these companies face in managing their debt obligations.
Figure 2020: Cash ratio of DRC and Peer
The cash ratio is a liquidity measure that shows a company’s ability to cover its short-term obligations using only cash and cash equivalents In general, this ratio of DRC
DRC CSM SRC Peer average
DRC CSM SRC Peer average
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During the analyzed period, DRC's cash ratio was below 1, indicating that the company has more short-term debt than available cash However, DRC's ratio was higher than that of its industry peers, CSM and SRC Consequently, when lenders, creditors, and investors assess short-term risk, DRC remains a favorable option compared to other companies in the sector.
Efficiency Ratios
Figure 2121: Inventory turnover ratio of DRC and Peer
Inventory turnover reflects a company's efficiency in managing its inventory For DRC, the inventory turnover ratios were 3.14 times in 2020, 3.28 times in 2021, and decreased to 2.61 times in 2022 This decline from 3.28 to 2.61 times from 2021 to 2022 can be attributed to the company's strategy of increasing inventory amid rising input material prices, coupled with challenges in business operations due to US and Western sanctions against Russia, which disrupted export-import activities in these markets.
DRC's inventory turnover ratio significantly exceeds the industry average, with figures of 3.96 times in 2020, 3.14 times in 2021, and 2.59 times in 2022 This indicates that DRC effectively manages its inventory, ensuring regular sales and stability in its operations.
DRC CSM SRC Peer average
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Figure 2222: Average Collection Period of DRC and Peer
This ratio shows how active the company is in collecting money from sales For DRC, in 2020 with 13 days, the business completes one round of receivables, 13 days in
2021 and 16 days in 2022 For the average industry, 2020 is 52.56 days, 2021 is 64.95 days,
In 2022, DRC's average collection period was 34.61 days, significantly lower than the industry average This indicates that DRC excels in its ability to collect payments from buyers compared to other companies in the tire industry.
In 2022, the average collection period for DRC increased from 13 to 16 days, attributed to the effects of the Covid-19 pandemic As a response, DRC relaxed its credit policy for agents operating in the central region and Brazil.
DRC CSM SRC Peer average
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Figure 2323: Day payable outstanding of DRC and Peer
In 2020 and 2021, DRC maintained a lower average days payable outstanding compared to the industry average However, in 2022, this figure rose to 39 days, surpassing the industry norm This increase is primarily due to DRC's proactive negotiations with rubber suppliers to extend payment terms Additionally, the company strategically purchased raw materials on credit during early 2022 when rubber prices were low, leading to a rise in both payables and the number of days payable.
This index assesses the efficiency of a company's asset utilization, indicating the revenue generated from each dollar invested in assets during production and business operations.
DRC CSM SRC Peer average
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Figure 2424: Total asset turnover ratio of DRC and Peer
In the DRC, each dong invested in assets yielded revenues of 1.42 dong in 2020, 1.57 dong in 2021, and 1.49 dong in 2022 Similarly, the average industry also reported a revenue generation of 1.42 dong in 2020, 1.57 dong in 2021, and 1.49 dong in 2022 for every dong invested in assets.
The total asset turnover ratio declined from 1.57 to 1.49, despite a net sales increase of 11.85% and a 17.72% rise in average total assets This indicates that the company faced challenges in utilizing its assets to generate profits amid global economic fluctuations Nevertheless, DRC's total asset turnover remains above the industry average, reflecting superior management of total assets compared to other tire companies in the sector.
Long-term solvency Ratios
DRC CSM SRC Peer average
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Figure 2525: Debt to assets ratio of DRC and Peer
The long-term solvency ratio reflects a company's debt relative to its assets In 2020, DRC's ratio was 0.31, the lowest among its peers and below the industry average Although this ratio has increased over the past two years, it remains below 0.5, indicating that a significant portion of DRC's assets is financed by equity In contrast, competitors in the same industry consistently maintained ratios above 0.5, suggesting potential challenges in taking on additional debt.
DRC CSM SRC Peer average
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Figure 2626: Debt to equity ratio of DRC and Peer
The debt-to-equity (D/E) ratio is a key financial metric that compares a company's total liabilities to its shareholder equity, helping to evaluate its reliance on debt From 2020 to 2022, DRC maintained a low D/E ratio, indicating minimal investment risk and a reduced dependence on debt financing In contrast, both CSM and SRC exhibited significantly higher D/E ratios, exceeding DRC's by more than twofold.
Figure 2727: Interest coverage ratio of DRC and Peer
DRC CSM SRC Peer average
DRC CSM SRC Peer average
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The interest coverage ratio measures a company's ability to pay interest on its outstanding debt, with a higher ratio indicating better financial health DRC achieved a remarkable peak of 40.43 in 2021, attracting significant investor interest Despite a decline to 21.59 the following year, DRC's ratio remained superior to those of two other companies.
Figure 2828: Equity Multiplier of DRC and Peer
The equity multiplier measures the proportion of a company's assets financed by stockholders' equity In a comparative analysis of three companies within the same industry, all demonstrated an upward trend over the period However, a lower equity multiplier is more favorable for investors, and DRC achieved a lower ratio than both CSM and SRC, indicating a stronger financial position.
Profitability Ratios
DRC CSM SRC Peer average
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Figure 2929: Gross profit margin of DRC and Peer
The gross profit margin indicates the profit generated prior to the deduction of financial, sales, general, and administrative expenses DRC exhibits stability in this ratio, reflecting its inherent ability to achieve a premium over manufacturing costs, even in the competitive consumer goods market Overall, DRC's ratio remained consistent throughout the period of 2020.
2022 is still higher than that of the average industry that makes DRC a very profitable company
DRC CSM SRC Peer average
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Figure 3030: Net profit margin of DRC and Peer
The net profit margin indicates the proportion of revenue that translates into profit From 2020 to 2022, companies in the industry faced a slight downtrend, yet DRC maintained a dominant percentage compared to its competitors This suggests that DRC's management effectively controls expenses while generating adequate profit from sales, making it a highly recommended option for investors.
Figure 3131: EBITDA margin of DRC and Peer
DRC CSM SRC Peer average
DRC CSM SRC Peer average
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The EBITDA Margin reflects a company's earnings before interest, taxes, depreciation, and amortization as a percentage of revenue, allowing for a comparison of profitability among companies of different sizes within the same industry Recently, the EBITDA Margin for three companies has declined, indicating potential profitability and cash flow challenges However, DRC stood out with a higher ratio than its competitors, attracting more attention despite the overall decrease in margins.
Figure 3232: EBIT margin of DRC and Peer
EBIT and EBITDA are closely related profitability metrics, with EBITDA including depreciation and amortization, while EBIT excludes them The overall decline in the industry suggests that the company is facing profitability and cash flow challenges Notably, DRC attracted more attention due to its higher ratio compared to two other industry competitors.
DRC CSM SRC Peer average
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Figure 3333: ROA of DRC and Peer
The Return on Assets (ROA) metric indicates a company's efficiency in utilizing its assets to generate profits During the analyzed period, DRC's ROA ratio steadily increased, in contrast to a decline observed in the ratios of other companies This suggests that DRC is more effective and efficient in managing its financial resources to yield profits.
Figure 3334: ROE of DRC and Peer
DRC CSM SRC Peer average
DRC CSM SRC Peer average
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Return on Equity (ROE) measures how effectively a company utilizes shareholders' capital In 2020, SRC boasted the highest ROE in the industry, but this figure fell to approximately 6% by 2022, indicating challenges in capital management Conversely, DRC's ROE was over 15% in 2020 and has significantly improved since, reaching the highest position post-2022 This substantial enhancement in capital control suggests that investors can have confidence in DRC.
Market value ratios
Figure 3435: Earnings per share of DRC and Peer
DRC's earnings per share surpass those of its industry competitors, demonstrating consistent growth over the past three years This trend indicates that shareholders of DRC enjoy greater profits compared to those holding shares in CSM and SRC.
DRC CSM SRC Peer average
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Figure 3536: Price to earnings ratio of DRC and Peer
DRC's earnings per share surpass those of its competitors in the Vietnamese tire industry, yet its share price remains lower, resulting in the lowest price-to-earnings (P/E) ratio among peers This indicates that DRC stock is undervalued, presenting a promising opportunity for value investment and long-term holding.
DUPONT ANALYSIS
Return on assets
Table 3: Return on assets of DRC 2020-2022
According to the Dupont model, ROA is the combined result of Net Profit Margin with Asset Turnover Analyzing the impact of factors on ROA in 2020 we have:
ROA = Net Profit Margin x Asset Turnover
DRC CSM SRC Peer average
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In 2020 and 2021, the DRC achieved return on assets (ROA) of 9.98% and 10.45%, respectively, reflecting improved profitability and effective cost management However, in 2022, the ROA declined to 9.37%, influenced by decreases in both net profit margin and asset turnover.
Return on common equity
Table 4: Return on common equity of DRC 2020-2022
Through the Dupont model, we consider each indicator affecting the company’s ROCE in 2022 as follows:
ROCE = Adjusted Profit Margin x Asset Turnover x Leverage
The return on common equity of DRC increased from 15.44% (2020) to 16.8%
In 2022, the Return on Capital Employed (ROCE) rose to 16.68%, reflecting a significant improvement in the total asset turnover ratio compared to 2020, driven by a sharp increase in net revenue post-Covid-19 pandemic Additionally, financial leverage has increased to support investments in current assets However, the net profit margin experienced a decline due to rising rubber and transportation costs.
CREDIT ANALYSIS
Liquidity Ratios
Table 5: Liquidity ratios of DRC 2020-2022
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Long-term solvency Ratios
Table 6: Long-term solvency ratios of DRC 2020-2022
CONCLUSION 38 APPENDIX
In 2022, the tire industry faced significant challenges, particularly for DRC, due to rising input material and logistics costs that severely impacted profit margins Despite these obstacles, DRC achieved positive business results, with a net revenue increase of 11.85% driven by recovering export volumes from post-pandemic economic growth However, profit after tax rose only 5.62% year-over-year, totaling over 307 billion VND, as the escalating costs of input materials continued to erode profitability.
In 2022, DRC experienced significant fluctuations in its business results; however, by December 31, the company reported an 8.88% increase in total assets, rising from 3,139 billion VND to 3,418 billion VND Additionally, net revenue grew by 11.85%, and profit after tax increased from 291 billion VND in 2021 to 307 billion VND in 2022, marking a 5.62% rise Overall, DRC's production and business activities yielded very positive outcomes, with key targets surpassing the established plans.
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Provision for short-term investment 0 0 0
Held-to-maturity investment securities 150,000,000,000 320,000,000,000 210,000,000,000
Short-term repayments to suppliers 1,771,224,000 6,996,027,686 2,092,463,953
Short-term allowances for doubtful debts -1,357,876,705 -1,569,985,775 -1,919,443,849
Shortage of assets awaiting resolution 19,858,818 369,773,601 428,607,554
Allowances for decline in value of inventories 0 -8,013,851,767 -25,774,946,170
Taxes and other receivables from government budget 0 0 0
Government bonds purchased for resale 0 0 0
Long-term repayments to suppliers 0 0
Working capital provided to sub-units 0 0 0
Long-term intra-company receivables 0 0 0
Long-term allowances for doubtful debts 0 0 0
Value of tangible fixed assets 1,058,688,241,066 969,110,090,272 895,582,263,939 Original cost of tangible fixed assets 3,224,664,891,173 3,237,790,510,494 3,226,908,808,804 Accumulated depreciation of tangible fixed assets -2,165,976,650,107 -2,268,680,420,222 -2,331,326,544,865
Value of finance lease assets 1,468,035,599 3,618,940,579 2,928,520,812
Original cost of finance lease assets 1,677,754,970 4,142,518,606 4,142,518,606
Accumulated depreciation of finance lease assets -209,719,371 -523,578,027 -1,213,997,794
Value of intangible fixed assets 3,445,143,954 2,737,542,517 2,029,941,080
Original cost of intangible fixed assets 9,593,841,631 9,593,841,631 9,593,841,631 Accumulated depreciation of intangible fixed assets -6,148,697,677 -6,856,299,114 -7,563,900,551
Original cost of investment property 0 0 0
Accumulated depreciation of investment assets 0 0 0
Long-term assets in process 86,922,720 235,138,571 11,628,344,170
Long-term work in progress 0 0 0
Allowances for long-term investments -2,220,278,924 -1,930,664,222 -1,679,774,771
Long-term equipment and spare parts for replacement 0 0 0
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Short-term prepayments from customers 62,011,900,013 142,185,639,068 114,867,829,306 Taxes and other payables to government budget 28,464,308,216 12,358,674,914 23,401,855,236
Short-term intra-company payables 0 0 0
Payables under schedule of construction contract 0 0 0
Government bonds purchased for resale 0 0 0
Long-term repayments from customers 0 0 0
Intra-company payables for operating capital received 0 0 0
Long-term intra-company payables 0 0 0
Science and technology development fund 0 0 0
Conversion options on convertible bonds 0 0 0
Undistributed profit after tax 206,102,586,248 241,476,941,788 318,473,704,098 Undistributed profit after tax brought forward 9,182,110,595 10,044,947,802 11,289,026,842 Undistributed profit after tax for the current year 196,920,475,653 231,431,993,986 307,184,677,256
State budget capital and other funds 0 0 670,000,000
Bonus and welfare fund (before 2010) 0 0
Sources of funding for the formation of fixed assets 0 0 670,000,000
TOTAL LIABILITIES AND OWNER'S EQUITY 2,430,709,559,391 3,135,943,084,235 3,417,798,778,419
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Profit/(loss) from joint venture 0 0 0
Gain/(loss) on operating activities 322,095,931,413 365,120,013,170 385,315,964,433
Profit/(loss) from joint venture company (since 2015) 0 0
Net profit/(loss) before taxes 320,527,758,446 364,122,142,045 386,460,635,447
Cost of corporate income tax -64,210,980,293 -73,293,845,559 -79,275,958,191
Net profit/(loss) after taxes 256,316,778,153 290,828,296,486 307,184,677,256
Profits of Shareholders of the Parent Company 256,316,778,153 290,828,296,486 307,184,677,256
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I Cash flows from operating activities
1 Proceeds from sales and services rendered and other revenues 3,816,524,884,957 4,354,187,696,992 4,777,470,439,265
5 Expenditures for enterprise income tax -64,233,288,628 -88,519,641,643 -68,225,061,237
6 Expenditures for value-added tax 0
7 Other proceeds from operating activities 35,073,896,690 329,325,922,177 344,868,638,395
8 Other expenditures on operating activities -180,250,259,701 -176,016,322,158 -140,174,550,327
Net cash flows from operating activities 852,990,018,996 -67,813,289,012 28,378,589,952
II Cash flow from investing activities
1 Expenditures on purchase and construction of fixed assets and long- term assets -9,147,217,800 -10,469,712,982 -13,203,284,571
2 Proceeds from disposal or transfer of fixed assets and other long- term assets 200,000 1,500,000 1,290,086,760
3 Expenditures on loans and purchase of debt instruments from other entities -234,000,000,000 -480,000,000,000 -740,000,000,000
4 Proceeds from lending or repurchase of debt instruments from other entities 84,000,000,000 310,000,000,000 850,000,000,000
5 Expenditures on equity investments in other entities 0
6 Proceeds from equity investment in other entities 0
7 Proceeds from interests, dividends and distributed profits 3,681,569,375 7,021,519,854 22,686,937,871
Net cash flow from investing acticities -155,465,448,425 -173,446,693,128 120,773,740,060
III Cash flow from financing activities
1 Proceeds from issuance of shares and receipt of contributed capital 0
2 Repayment of contributed capital and repurchase of stock issued 0
3 Short-term and long-term loans receivable 2,447,665,917,858 4,004,214,931,370 4,066,207,359,386
5 Expenditures on equity investments in other entities 0
7 Dividends and profits paid to owners -178,188,904,650 -118,792,603,100 -201,947,425,270
Net cash flow from financing activities -554,423,058,691 141,836,514,726 -83,485,439,416
Net cash flow during the fiscal year 143,101,511,880 -99,423,467,414 65,666,890,596
Cash and cash equivalents at the beginning of fiscal year 45,704,997,626 188,810,249,298 89,621,165,826
Effect of exchange rate fluctuations 3,739,793 234,383,941 17,447,968
Cash and cash equivalents at the end of fiscal year 188,810,249,299 89,621,165,825 155,305,504,390
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Days sales in inventory ratio 116 111 140
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