Group essay subject corporate financial analyis research financial analysis of dabaco company

The growth rate of the industry Dabaco Vietnam Group operates in multiple sectors, with its primary business activities focusing on the production of animal feed, livestock, poultry bre

STATE BANK OF VIETNAM UNIVESITY OF BANKING IN HO CHI MINH CITY

GROUP ESSAY Subject: CORPORATE FINANCIAL ANALYIS

Research:

FINANCIAL ANALYSIS OF DABACO COMPANY

Lecturers: Ms Vo Thien Trang

Members:

Le Van Hieu Phan Thi Minh An

Duong Tuyet Nhu Thieu Thanh Giang Nguyen Thi Thu Hien On Minh Kim Chau

Vo Ngoc Han Le Vu Phuong

Vo Thi Thuy Vien Nguyen Thi Như Y

Class: FIN304_232_1_D01 - Group: 6

HO CHI MINH CITY - 2024

HONOR STATEMENT

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On Minh Kim Chau - MSSV: 030138220040 Duong Tuyet Nhu - MSSV: 030138220293

Vo Ngoc Han - MSSV: 030138220116

Vo Thi Thuy Vien - MSSV: 030138220487

Le Vu Phuong - MSSV: 050608212142 Nguyen Thi Nhu Y - MSSV: 030138220518 Group asignment assurance: FINANCIAL ANALYSIS OF DABACO COMPANY

Instructor: Master Vo Thien Trang

This report is entirely our own work, with independently derived analysis results, and has not been copied from any other source It has not been published in full or in part

elsewhere; all data and citations in this report are clearly and transpa rently referenced

We take full responsibility for the honor pledge stated above

Ho Chi Minh City, June 25, 2024

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CHAPTER 1: INDUSTRY, OCCUPATION, AND FIELD ANALYSIS OF

DABACO USING MICHAEL PORTERS FIVE FORCES MODEL 1 1.1 ANALYSIS OF COMPETITIVE PRESSURE IN THE INDUSTRY 1 1.1.1 The growth rate of the ÏdUSẨfy . nh» re 1

1.1.4 Surplus capacity and barriers to exit the indus†ry .-.cSằĂẰSSeSeie 6

CHAPTER 2: ASSET STRUCTURE AND CAPITAL COMPOSITION OF

DABAGO FROM 2021 TÔ 202 LH HT nh TH Hi nh 14

2.6.1 Cash flow analysis using indirect method (EAT) cà 23

2.6.1.1 Analysis of cash flow from operating activifies -. cà see*exe 24

2.6.1.2 Analysis of cash flow from investing Activities ee seeeeeeeseneeeeeenteeetenees 25 2.6.1.3 Analysis of cash flow from financing actiVvities ccceeeeeheerrree 25

2.6.1.4 Analysis of the relationship between Cash fÏOWS - cà 25

2.6.3 Analysis of Differences Between NOCF and EAT .:c::ceceeeeeeeeeeeeeeeeeeteeees 27 CHAPTER 3: BUSINESS PERFORMANCE OF DABACO FROM 2021 TO

3.1 OVERVIEW OF DABACO'S BUSINESS PERFORMANCE FROM 2021

3.2 PROFIT FROM CORE BUSINESS OPERATIONS 33 3.3 FINANCIAL PROFIT AND OTHER PROFIT - - Sài 38 CHAPTER 4: FINANCIAL RATIOS OF DABACO FROM 2021 TO 2023 40 4.1.ANALYSIS OF PAYMENT CAPABIL [TY . HH HH Hi 40

4.1.1 Short-term Debt Payment Halio - - Q -SLn SH» TH khe 40

4.1.1.2 QUICK RATIO 40

4.1.2 Debt Service Coverage Ratio of Dabaco Vietnam JSC cà 42 4.2 PROFITABILITY ANALYSIS OF CAPITAL 10 cceeecceeeeeeeeeeeeeeeeeeeaeeeeeeeneetaee 43

4.3 MARKET INDICATOR ANALYSIS . - SH» Hệ, 46 CHAPTER 5: ANALYSIS OF DABACO'S STOCK -c cà S se 48

5.1 OVERVIEW OF DABACO'S REVENUE AND ASSET STRUCTURE 48 5.2 INDUSTRY POTENTIAL

5.3 OVERVIEW OF DABACOS FINANCIAL PERFORMANCE 49 5.4 EVALUATION OF FACTORS IMPACTING DABACO'S STOCK PRICE

CONCLUSIONS

REFERENCES

LIST OF FIGUES

Figure 1.1 Chart of industrial feed production in the period 2018 - 2022 1

Figure 1.2 Top 10 Reputable Feed Companies in 2023, December 20238 .4+- 2

Figure 1.4 Price Comparison Chart of Brands on the Market - 7 Figure 1.5 Some livestock businesses operate under the integrated 3F model 8

Figure 1.6 Assessment of Competitive Pressure in the Animal Feed Industry 12

Figure 1.7 Revenue Chart of Animal Feed Companies . - - +: 13

Chart 4.9 Return on Average ASS6[S QQ -LTHHnnHnH HH HH tr 44

Chart 4.11 Return on Average EQqUuify LH HH kh 45 Chart 5.1 Revenue and Net Profit by Business Segment of Dabaco 2021-2023 .48 Figure 5.2 Description of competitive pressure of animal feed businesses 49

Figure 5 3 Chart of pig price developments (thousands of VND/kg) in the

Figure 5.4 Corn price trend chart (left chart, million VND/ton) and soybean

price trend (right chart, million VND/ton) LH HH ky 51

Figure 5.5 Dabaco's 3F value Chain MOE .:eseseeceeeeneeeeeeeeeeeeeeneeeeeseneeeeeeenneees 52 Figure 5.6 Dabaco stock price fluctuations on the stock market in recent years 54

LIST OF TABLES

Table 2.1 Asset Structure Of DabaCO . c TT SH nn HH nh re 14

IEl9) 7220-0062 nì 0 0on9 co ^ 15

Table 2.3 Variations in the Asset and Capital Structure of Dabaco Corporation Table 2.4 Financial Structure Analysis of the Company Dabaco 18

Table 2.5 Revenue, cost of goods sold, and sales of Dabaco 20in 2021, 2022, and 2920 20

Table 2.6 Accounts receivable, inventory, and accounts payable of Dabaco 20

Table 2.7 Summary of data from tables 2.3 and 2.4 (T†) cà 21 Table 2.8 Summary of data from tables 2.3 and 2.4 (2) nhe 22 Table 2.9 Cash flow analysis using indirect method (EAT) 23

Table 2.10 Solvency from net operating Cash fÏOW «nành 26 Table 2.11 Analysis of Differences Between NOCPF and EAT - 27

Table 3.1 Profit Structure of DabacO - nen HH kh 29 Table 3.2 Comparison of Profit Structure of DabacO - se 29 Table 3.3 Analysis of Business Performance Fluctuations .- 30

Table 3.4 Analysis of Profit from Core Business Operations 33

Table 3.5 Comparison of Dabaco’s DOL and DFL for the period 2021-2023 37

Table 3.6 Analysis of Financial Activities and Other Business Operations 38

Table 4.1 Current Payment CoefficienifS - SH HH H* HH HH, 40 Table 22900 0n 6e 40

Table 4.3 lInventory Turnover Ha†@ - LH HH HH kg Hy 41 Table 4.4 Ability to Pay from Net Cash Flow from Operating Activities 42

Table 4.5 Cash Flow from Operating ActiViti@S - che 42

Table 4.6 Return on lnvesf†rnenn† - - -c cc CS kh nh ch re 43

Table 4.8 Return on Average ÀSS6ŸS§ nàn HH Họ kh re 44

strategy Financial statements are the primary documents used to analyze a company's financial performance as they provide the most comprehensive reflection of the

company's personnel, capital, assets, and other financial indicators and business

efficiency Due to its importance, the group has chosen the topic "Financial Analysis of

Dabaco Group Joint Stock Company" for our group's report

CHAPTER 1: INDUSTRY, OCCUPATION, AND FIELD ANALYSIS OF

DABACO USING MICHAEL PORTER'S FIVE FORCES MODEL

1.1 ANALYSIS OF COMPETITIVE PRESSURE IN THE INDUSTRY

1.1.1 The growth rate of the industry

Dabaco Vietnam Group operates in multiple sectors, with its primary business

activities focusing on the production of animal feed, livestock, poultry breeding, and food processing The increasing demand for food positively impacts the growth of the

livestock market and drives the development of animal feed production

From 2010 to 2022, the livestock sector exhibited the highest growth rate within the agriculture industry, with meat production increasing by 1.75 times, egg production by

2.9 times, fresh milk by 4 times, and industrial animal feed by nearly 2 times Additionally, many livestock products have expanded into export markets, including

honey, suckling pigs, bird nests, salted duck eggs, milk, and processed chicken meat In

2023, the majority of raw materials for Vietnam's animal feed production industry were imported, estimated to account for about 65% of the total domestic demand for animal feed

Figure 1.1 Chart of industrial feed production in the period 2018 - 2022

(Source: Vietnam Report, 2023)

Development, Duong Tat Thang, Director of the Department of Livestock Production, provided an update on the livestock industry as of the first quarter of 2024 With favorable weather conditions, including the absence of prolonged severe cold spells, and effective disease control measures implemented by localities, the livestock sector in Q1/2024 remained relatively stable in terms of both herd size and growth rate The total

1

live meat production in Q1/2024 was estimated to exceed 2 million tons, reflecting a 4.5% increase compared to the same period in 2023 With its open-door policy, Vietnam

has created an attractive investment environment and favorable conditions for numerous large global corporations and enterprises from the United States, Europe, Japan, South Korea, Thailand, China, and other countries to invest in and develop livestock

businesses in Vietnam Currently, Vietnam hosts more than 300 domestic and

international animal feed production companies, with GreenFeed Vietnam Corporation

ranking 37th in the world in this sector (Source: World Mega Producer, Pork Commentary, Genesus Inc, 06/04/2024)

From a comprehensive perspective, Vietnam's livestock industry has achieved

notable global standings in 2022 - 2023 Specifically, the waterfowl population

(primarily ducks, but also including geese) ranked second globally with 103 million birds; the pig population exceeded 30 million, ranking fifth; and industrial feed production ranked 12th globally with 20.5 million tons, leading the ASEAN region Although the dairy sector developed later, milk production reached nearly 1.2 million

tons in 2023, ranking 11th in Asia, with productivity placing fifth in Asia The total

value of the livestock industry accounted for 26% of the agricultural sector's GDP In

2023, the export value of livestock products (including honey, salted eggs, suckling pigs, bird nests, processed chicken meat, etc.) reached 515 million USD

1.1.2 Competitive capacity against existing rivals

On December 15, 2023, Vietnam Report officially announced the ranking of the Top

10 Reputable Animal Feed Companies of 2023 In this ranking, Dabaco Vietnam Group JSC was placed 8th

Figure 1.2 Top 10 Reputable Feed Companies in 2023, December 2023

(Source: Vietnam Report, 2023)

2

However, in Q2/2023, the company recorded a loss due to having to cull a large number of chickens and sows because of African swine fever, which significantly

reduced the group's pig population Despite this setback, the company is still regarded

as a leading entity in the livestock and meat production sector in Vietnam This is

attributed to Dabaco's advanced, closed-loop production model (the 3F model: Feed —

Farm — Food), which Dabaco has developed to a very high level with distinct

characteristics The company proactively distributes its products to the market by

developing a modern retail system through supermarkets and clean food stores This production model has helped Dabaco maintain its competitive position in the market,

especially during the COVID-19 period when many businesses struggled with

production challenges, yet this company still achieved growth exceeding its targets

In Vietnam, in terms of production structure, Vietnamese enterprises hold a smaller market share compared to foreign companies or joint ventures in the animal feed market Among the 10 largest animal feed producers, only Dabaco Vietnam Group and VINA Corporation are Vietnamese companies, with modest market shares of 3% and 2% respectively in 2015, and this percentage decreased by 2018 due to the entry of more

competitors It is evident that Dabaco's products are highly regarded in terms of quality, which enables them to compete for market share with major corporations from advanced

countries worldwide

1.1.3 Competitive advantages of the company

In 2019, Dabaco's goal was to establish a closed-loop supply chain to anticipate future market demands Over 20 years ago, the company's leaders recognized that domestic

production and livestock would eventually be systematized and modernized This

foresight has proven correct, as the livestock market has been regulated and developed towards industrialization by the state While other companies are struggling with market,

Figure 1.3 3F Model

(Source: Dabaco,201 2) Dabaco possesses several distinctive points and competitive advantages in terms of

products, services, and cost transformation compared to many industry peers:

“Large agricultural supply capability:

In the animal feed sector, Dabaco has strategically invested in a system of high-grade

industrial feed processing plants located in provinces such as Bac Ninh, Ha Nam, Ha Tinh, Binh Phuoc, and Phu Tho, with a total capacity of 1.5 million tons Currently, the

group owns six animal feed brands: Dabaco, Topfeeds, Kinh Bac, Khangti Vina, Nasaco, and Grow Feeds This system not only provides animal feed nationwide but

also supplies directly to the group's farms

In the livestock breeding sector, Dabaco operates breeding farms for purebred swine,

importing breeds such as Duroc, Piteran, Landat, Yorkshire from Canada, Denmark,

Spain, and the USA They produce parent stock, hybrid breeds, and commercial breeds, supplying these to their processing livestock facilities and the market Their parent stock poultry farm features state-of-the-art technology, specializing in breeding and supplying Hubbard breeds imported from France, as well as exclusive bree ds like JiDABACO and Son Tinh (9-spur chicken), known for their high spiritual and economic value

Notably, they produce the rare green-shell eggs, known as ginseng eggs, a unique product exclusive to Dabaco

Moreover, Dabaco owns a poultry slaughtering line imported from Denmark with a capacity of 2,000 chickens per hour, a pig slaughtering workshop providing clean pork and chicken products to the market, and a modern meat processing plant with equipment imported from Europe, manufacturing products like sausages, minced meat, canned goods, ham, and paté with enticing flavors, ensuring food safety and hygiene standards Raw materials are strictly selected according to international standards, with production

processes and quality control conforming to ISO 22000 and VIET G.A.P Dabaco also

operates a PP and PE plastic packaging plant in Bac Ninh province and a raw material processing plant for animal feed in Hoa Binh province

“Effective application of high technology in core operations:

Dabaco has established a Biotechnology Center to conduct research, development, and application of biotechnology in livestock farming and veterinary medicine, particularly in genetics and breeding This proactive approach in genetic resource management enables DABACO to selectively breed pigs and chickens for high

productivity and quality, serving the farming community's sustainable development

needs

Their Livestock and Poultry Genetic Testing Center is the first in Vietnam equipped with the FAN'S Feed Assessment Network System and Software, which automates data

processing to monitor and evaluate all technical indicators in pig farming, including

growth rates, feed efficiency, individual profitability, and losses This capability ensures

accurate evaluation of breeding stock and trials of new feed types before market release

Their Veterinary Diagnostic Center employs a team of highly qualified veterinarians,

engineers, and technicians tasked with disease diagnosis, prevention in livestock companies, breeding stock production, monitoring hygiene processes, nutritional analysis, and microbiological analysis in livestock farming The facility is equipped with Vilas 834 accredited testing laboratories according to ISO/IEC 17025:2005 standards,

as well as a Biosafety Level 3 (BSL3) biological safety laboratory with a system of biological safety cabinets imported from the USA, deep-freeze refrigerators (-80°C) for preserving viral seed vaccines, and nitrogen tanks

Furthermore, Dabaco is constructing an animal vaccine production plant, aiming to

strategically develop core areas and apply advanced technologies within the 3F model, maximizing production efficiency This strategic investment supports their long-term

business growth and ensures competitiveness in the industry

However, Dabaco's conversion costs are susceptible to competition from other enterprises and small-scale livestock farming households due to their relatively low

conversion costs This makes it easier for customers to switch suppliers as they do not

experience significant disruptions

Other enterprises can directly compete with Dabaco by offering similar products or services at lower prices or better terms For small-scale manufacturers, they can provide more personalized services at lower costs due to their lower overall expenses According

to the Chairman of BAF Vietnam, even the largest enterprises in Vietnam, such as C.P Vietnam, do not dominate a significant portion of the total herd, while small-scale livestock farming households account for up to 70% of the total herd nationwide In fact,

the growth of BAF Vietnam and other companies recently has been at the expense of

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decreasing numbers of small-scale livestock farming households, such as C.P Vietnam, which, if unable to sell their products, still have to discount them due to continued

competition with small-scale farmers Dabaco finds itself in a similar situation

1.1.4 Surplus capacity and barriers to exit the industry

Dabaco continues to grow and expand its business footprint through an advanced, vertically integrated production model alongside a modern retail system The corporation currently owns several well-known brands such as Dabaco, Topfeeds, Kinh

Bac, Khangti Vina, Nasaco, and Growfeeds, offering a range of high-quality products that generate stable revenues for the company The closed-loop production process remains a competitive advantage for the corporation While this indicates robust

operational performance, it could potentially hinder the company's ability to exit the

industry if desired The substantial investments in technology, specialized equipment, and ownership of renowned brands like those mentioned above could complicate any withdrawal from the sector, negatively impacting the company's reputation and image

Furthermore, from 2021 to 2023, Dabaco's financial leverage ratio has shown an increase compared to previous periods This reflects an increasing financial risk for the corporation Therefore, if this financial leverage ratio continues to rise in the future and the company intends to exit the industry, it could adversely affect the corporation's

profitability

To mitigate potential adverse scenarios in the future, Dabaco has implemented several measures to minimize factors that could force the corporation to exit the industry A significant initiative has been the reduction of incidental costs during periods of business

volatility Dabaco Vietnam has diversified its investments into supportive production,

livestock farming, and consumption activities This includes the construction of PP and

PE plastic packaging manufacturing plants, raw material processing plants for livestock

feed, and research centers to ensure product quality Additionally, to maximize profitability, the corporation has ventured into the real estate business Specifically, Dabaco is the investor behind Qué V6 III Industrial Park, covering over 600 hectares in Bac Ninh province In addition to industrial parks, Dabaco has invested in several large-

scale, modern urban development projects such as Dén D6 Urban Area, Huong Mac Industrial Cluster, Dabaco Van An Urban Area, Dinh Bang, and Phu Khé These sectors

significantly contribute to the corporation's development and play a crucial role in

promoting the industrialization and modernization of Bac Ninh province's economy and

society

1.2 ANALYSIS OF CUSTOMER POWER

Dabaco takes pride in being a leading company providing comprehensive nutritional solutions for livestock, poultry, and aquaculture, offering a full range of products for

every stage of animal growth and development This is crucial for large-scale, high-yield

livestock farming that ensures consumer safety Strict adherence to the ISO 22000:2005

Food Safety Management System regulations allows the company to control all stages

of the food supply chain, preventing food safety hazards and producing high-quality,

safe products for consumers

By leveraging its strengths in controlling the agricultural - food value chain from breeding, animal feed, and centralized farming, to slaughter and food processing — Dabaco continuously improves and enhances product quality and services to prioritize consumer health The company possesses all the necessary infrastructure, equipment,

personnel, and technology to produce clean, safe products under the DBC FOOD brand,

meeting the increasingly high demands of consumers

Today, the demand for clean and safe food choices among Vietnamese consumers is rising due to growing concerns about personal and family health Consumers carefully consider product quality, pricing, and other factors, making it imperative for Daba co to

continually innovate its products and services to retain customer loyalty Thi s stra tegic approach helps Dabaco maintain a competitive edge and strengthens its position in the

market by aligning with consumer preferences for safe and healthy food options

Figure 1.4 Price Comparison Chart of Brands on the Market

(Source: Thesaigontimes, 2012)

The chart comparing prices of various brands on the market reveals that Dabaco's prices for pork belly are relatively high compared to other brands This higher pricing

strategy may potentially lead to Dabaco losing some prospective customers, particularly

those who prioritize affordability However, Dabaco holds a reputable position in

Vietnam's clean meat market It is trusted by many consumers for its safe and modern

farming practices, ensuring high product quality Moreover, Dabaco has an extensive distribution network nationwide, making it convenient for customers to purchase its products

1.3 ANALYSIS OF THREATS FROM SUBSTITUTE PRODUCTS

A substitute product is a good or service that can replace others with similar utility

In a broader context, businesses within an industry must compete not only with each

other but also with substitute products that offer comparable benefits

At a larger scale, the presence of substitute products always poses a barrier that limits the potential profitability of the industry, establishing a maximum price threshold that

industry players can set

Dabaco benefits from having an integrated production chain and stable production costs, which provide an advantage in competing with large businesses in the food processing sector both domestically and internationally However, the trend towards the 3F model (Feed, Farm, Food) is gaining traction among many businesses, leading to the

formation of integrated production chains This intensifies competition with both foreign and domestic products in the market

Figure 1.5 Some livestock businesses operate under the integrated 3F model

(Source: Mekongasean, 2020)

In Vietnam's meat industry, several domestic giants such as Hoa Phat Group, Truong Hai Corporation, and Hoang Anh Gia Lai have invested heavily in pig farming For

instance, Hoang Anh Gia Lai introduced the "Bapi" brand, emphasizing "banana-fed

pork," and opened the first BabiMart store in Ho Chi Minh City on September 17, 2022

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Meanwhile, major players like Masan Meatlife (MML) hold a significant market share,

with products like Meat Deli leading in pricing within the branded pork segment, boasting the "European standard chilled meat" story using Oxy Fresh 9 packaging technology

Furthermore, amid economic integration, products from countries within the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) enjoy import tax advantages The cost of animal feed in Vietnam is higher than in regional countries by 8 - 12% According to the Livestock Department, there are

currently about 218 domestic and foreign enterprises producing animal feed in Vietnam,

with a capacity of approximately 28,200 tons per year Of these, 71 are foreign-invested enterprises (FDI), producing over 15,700 tons annually, comprising 60-65% of total production Despite the vibrant potential of Vietnam's animal feed market, current advantages heavily favor foreign -invested enterprises

Moreover, there is a growing trend towards vegetarianism and reduced meat

consumption in Vietn am, with statistics indicating that approximately 10% of the

population regularly follows a vegetarian diet as of early 2023 (as reported by Newoi

Lao Dong) This shift in dietary habits could potentially decrease the demand for animal feed products as consumers reduce their meat intake

+ Thaco Group: With its strong financial resources and extensive distribution

network, Thaco Group could potentially enter the animal feed and pork processing sector to diversify its business operations Thaco could leverage its experience in automotive manufacturing and distribution to build an efficient supply chain for pork

In 2023, Thaco Group continued its expansion by signing a partnership agreement

with CJ Group (South Korea) to develop a hog raising and pork processing project in

Binh Duong province This project has a total investment of USD 200 million and is

expected to produce around 100,000 tons of pork annually

+ Hoa Phat Group: With its abundant financial resources and experience in the construction steel sector, Hoa Phat Group could venture into high-tech agriculture,

technological solutions to enhance production efficiency and product quality

In 2022, Hoa Phat Group established Hoa Phat Livestock Co., Ltd to invest in the

hog-raising sector The company has acquired several hog farms in Thanh Hoa and Ha

Nam provinces with a total herd size of over 10,000 heads

In 2023, Hoa Phat Group continued its investments by constructing a feed mill in

Thanh Hoa province with a capacity of 200,000 tons/year The plant is expected to be

operational in 2024

+ FLC Group: Possessing strong financial capabilities and a reputable brand in

tourism and real estate, FLC Group could potentially invest in the agricultural sector,

including hog raising and pork processing FLC could utilize its customer network and

brand to promote its pork products

In 2022, FLC Group established FLC Agriculture JSC to invest in the agricultural

sector, including hog raising The company has acquired several hog farms in Quang Ninh and Thanh Hoa provinces with a total herd size of over 5,000 heads

In 2023, FLC Group signed a collaboration agreement with De Heus Group (Netherlands) to develop a hog-raising and pork processing project in Ha Tinh province The project has a total investment of USD 100 million and is expected to produce

approximately 50,000 tons of pork per year

+ Startups: Startups in the fields of agricultural technology and alternative food sources could introduce innovative solutions, new business models, and create

competition for Dabaco For instance, startups could develop new feed formulations that enhance pork productivity and quality or create plant-based meat alternatives with

competitive taste and pricing

+ Mavin Group: This startup has successfully developed insect-based feed, reducing production costs and environmental impact Mavin Group aims to supply feed

to 1 million hogs within the next five years

+ VinSmart: This startup is researching and developing seaweed-based feed to

improve pork health and quality VinSmart expects to launch this product in 2025

1.4.2 Foreign Competitors

Multinational Companies: Major players in the agriculture and food industry, such

as Cargill, Tyson Foods, and JBS, could expand their operations into Vietnam, bringing advantages in technology, branding, and international experience

+ Cargill: Cargill, one of the world's largest animal feed suppliers, can expand into Vietnam and become a direct competitor to Dabaco Cargill's technological edge, brand

recognition, and international expertise allow it to attract customers with high-quality products and professional services

In 2022, Cargill expanded its feed mill in Dong Nai province with an additional capacity of 50,000 tons/year Cargill is also investing in research and development of new feed products tailored to Vietnamese farming conditions

In 2023, Cargill signed a cooperation agreement with Masan Group to supply feed

to Masan's hog farms This partnership is expected to help Cargill increase its market share in Vietnam's feed market

+ Tyson Foods: Tyson Foods, the largest meat producer in the United States, can

invest in the Vietnamese pork market to expand its international reach Tyson Foods' advantages in producti on scale and market access can create significant competitive pressure for domestic players

In 2022, Tyson Foods signed a partnership agreement with TH True Milk Group

to supply pork to the Vietnamese market This cooperation is expected to help Tyson

Foods access the third-largest pork consumption market in Southeast Asia

In 2023, Tyson Foods is in talks with several Vietnamese companies to invest in a pork farming project in Vietnam The project is expected to have a total investment of USD 200 million and supply the market with approximately 100,000 tons of pork per

year

+ JBS: JBS, the world's largest meat producer, can invest in the Vietnamese pork

market to capitalize on its cost-production advantage JBS can offer lower-priced pork

products, attracting price-sensitive consumers

In 2022, JBS established a branch in Vietnam to distribute imported pork products New FDI Enterprises: Companies from countries with developed pig farming sectors like China, Thailand, and Brazil can invest in Vietnam to exploit cost and market

advantages For instance, Chinese companies can invest in large-scale pig farms to reduce production costs, while Thai companies can invest in modern pork processing plants to enhance product quality

1.4.3 Competitors from Substitute Products

Poultry, Beef, and Seafood Producers: Consumer demand for protein can shift based on health trends and prices, leading to competition from substitutes for pork For

example, chicken consumption may increase due to its lower pric e and lower fat content

compared to pork

Plant-Based Food Producers: The growing demand for plant-based food, especially

in major cities, can pose a threat to the traditional pork market For instance, plant-based

meat products made from vegetables can provide similar protein and nutrients as pork but with competitive taste and prices

1.5 THE COMPETITIVE STRENGTH OF SUPPLIERS

In 2021, marked by significant turmoil for businesses in the animal feed production industry in general, and specifically for Dabaco, global complexities such as the Russia- Ukraine conflict, inflationary pressures, and the looming threat of crisis impacted supply chains and production networks Domestically, the livestock sector faced dual challenges from the C OVID-19 pandemic and African Swine Fever outbreak, leading

to difficulties for Dabaco and other domestic enterprises Specifically, the COVID-19

pandemic forced many restaurants and institutional kitchens to temporarily close, reducing pork demand By late June 2021, pork prices had dropped by approximately 20% compared to the beginning of the year, fluctuating between 63,000 to 69,000 VND per kilogram, essentially below production costs, causing financial losses for numerous

livestock farmers

Estimates suggest that Vietnam's total demand for animal feed additives is 33 million tons annually However, domestic production only meets 13 million tons per year Consequently, Vietnam imports up to 65% of its feed ingredients, creating a reliance on

international markets that impacts domestic production To mitigate production costs

associated with dependence on imported raw materials, Dabaco made efforts to directly procure materials from manufacturers rather than relying solely on traders

Figure 1.6 Assessment of Competitive Pressure in the Animal Feed Industry

(Source: Vietnam Report)

According to the report from the Department of Livestock (2022), the industrial

livestock feed production sector in Vietnam exhibits relatively fierce competition,

involving 269 complete-mix industrial feed production facilities.

Figure 1.7 Revenue Chart of Animal Feed Companies

(Source: Vietdata, 2022) However, amidst the nationwide challenges in 2021, DABACO swiftly managed to overcome issues regarding the supply of animal feed ingredients, positioning itself among the top 10 companies with significant market share in Vietnam, holding the 7th

position.

CHAPTER 2: ASSET STRUCTURE AND CAPITAL COMPOSITION OF

DABACO FROM 2021 TO 2023 2.1 ASSET STRUCTURE

Table 2.1 Asset Structure Of Dabaco

(Unit: %)

Weighting Comparison ASSETS

(Source: Self-synthesized group)

The comparison of Dabaco's asset and capital structure over 2022 and 2023 indicates

a shift towards increasing the proportion of short-term assets while reducing long-term

assets

The proportion of short-term assets rose from 51.9% at the end of 2021 to 54.58% by the end of 2023 This change is mainly due to a decrease in short-term receivables and other short-term assets, while inventory levels remained stable and cash holdings increased This adjustment in short-term assets is deemed rational and effective, as the reduction in receivables and the increase in cash and cash equivalents suggest that the

company has actively recovered debts, thereby reducing capital stagnation in the payment process and enhancing the efficiency of capital utilization Long-term assets of the company are primarily fixed assets The data indicates that the proportion of fixed assets in total assets decreased by 9.02% in 2022 but increased by 6.41% in 2023 Thus, this proportion has shown an upward trend from 2022 to 2023 This is a positive signal

14

for the company as it reflects an enhancement in the company's physical infrastructure

and an expansion in production capacity

2.2 CAPITAL STRUCTURE

Table 2.2 Capital Structure of Dabaco

(Unit: %)

Weighting Comparison CAPITAL

4 Rewards and welfare fund 0,83% 0,4% 0,26% -0,09% -0,48%

Il Long-term Liabilities 9,25% 8,63% 9,25% -0,62% 0,62%

2 Surplus in capital stock 3,85% 3,23% 3,22% -0,63% -0,01%

3 Development investment ful 23,20% 13,83% 13,83% -9,36% 0,00%

4 Undistributed post-tax profit 5,48% 0,06% 0,21% -5,42% 0,15%

Il Sources of Funds and

Other Funds

TOTAL CAPITAL 100,00% 100,00% 100,00%

(Source: Self-synthesized group)

The short-term capital structure of Dabaco has shown an increasing trend, starting at 47.61% at the beginning of 2021 and reaching 54.89% by the end of 2023 This trend is not aligned with the rising proportion of current assets, as the increase in current assets

is primarily due to rising cash and cash equivalents, while the increase in short-term

capital is mainly due to short-term borrowing A high proportion of short-term debt

indicates high payment risk for the enterprise, leading to significant pressure in

managing short-term debt obligations within the company's financial policies The

increase in long-term capital structure is primarily due to additional long-term borrowing by the company, with equity capital decreasing from 10.61% in 2021 to

15 0,00% 0,00% 0,00% 0,00% 0,00%

18.6% in 2023 Development investment funds have decreased in absolute terms but

maintained a stable proportion from 2022 to 2023 at 13.83%

In summary, the asset and capital structure of Dabaco from early 2022 to early 2023 did not experience significant changes

2.3 ANALYSIS OF THE DYNAMICS OF ASSET STRUCTURE AND CAPITAL

SOURCES OF DABACO

Table 2.3 Variations in the Asset and Capital Structure of Dabaco Corporation

(Unit: million Vietnamese dong)

100,00% 7.053.083,0L 100,00% 7.223.084,0 100,00%

(Source: Self-synthesized group)

(Source: Self-synthesized group)

Current

5.637.467.418.08 51,89% 706512996745 54,46% 7.101.240.626.45 54,58% assets

Long-

term 5.225.086.874.06 4810% 5.908.97395389 45,54% 5.910.46363141 45,42% assets

(Source: Self-synthesized group)

“The fluctuation of assets

According to Dabaco's financial report, the company's assets have steadily increased during the period from 2021 to 2023 Specifically, in 2023, the company's assets

increased by 1,158,893 million dong compared to 2021, equivalent to 0.46% This demonstrates the strength of Dabaco Joint Stock Company's capital mobilization efforts

in expanding production Specifically, the increase in short-term assets of the company can be attributed to:

Holding the largest proportion in the short-term asset category is inventory, accounting for 71.67% (2021), 73.83% (2022), and 76.07% (2023) The main reason is

the company's increased borrowing along with additional equity capital mobilization in

the year, indicating a slowdown in product consumption activities of the company

Other short-term assets increased: The increase in other short-term assets also contributed to the overall increase in short-term assets of the company In 2022, other short-term assets of the company increased significantly by 160,165 million dong From

2021 to 2023, this increase was primarily due to input value-added tax deductions The

sporadic outbreaks of African swine fever worldwide, coupled with the COVID-19 pandemic, have led to rising costs of raw materials, particularly imported raw materials, thereby increasing input value-added taxes

While short-term assets constitute a significant proportion of the asset structure, long-

term assets also account for a large proportion of 48.1% of total assets and have shown

a decreasing trend over the years

* Fluctuations in capital sources

Debt has shown an increasing trend and occupies a significant proportion in the

Capital structure of the company Specifically, in 2023, long-term debt increased by 18,932 million dong, and short-term debt increased by 2,241,262 million dong compared

to 2021 Long-term and short-term debts respectively account for 6.67% and 28.34% of the company's assets (2023)

This indicates that the company's financial autonomy is declining, which may lead to

several disadvantages for the company in maintaining its reputation and credibility, especially regarding its stocks in the securities market

2.4 FINANCIAL STRUCTURE AND SOURCES OF FINANCING THROUGH

WORKING CAPITAL

Table 2.4 Financial Structure Analysis of the Company Dabaco

(Unit: million Vietnamese dong)

(NWC)

Net working capital ratio

465.768 (147.898) (40.365) (613.666) 107.533

Working capital ratio

Net oF WOFKING Caplial "8.26% ki ital t 0 0 826% 0,00%

total assets ratio

to long-term assets

(Source: Self-synthesized group)

2.4.1 Working Capital

From the data presented, DBC's working capital from 2021 to 2023 has consistently

remained positive and i ncreased steadily Specifically, the fluctuations show an increase

of 491.916 billion VND from 2021 to 2022, and a further increase of 1.243.644 billion

VND from 2022 to 2023 The growth from 2023 to 2022 is more than double that of

2022 to 2021 This indicates that during the period from 2021 to 2023, DBC has been capable of meeting its short-term obligations, easily converting short-term assets into

cash, and settling due debts Consequently, the financial balance of the enterprise appears quite stable and secure, which partly reflects its successfu | development DBC's working capital from 2021 to 2023 mainly exists in the form of inventory,

with accounts receivable representing the largest proportion of total current assets, and

accounts payable to suppliers representing the largest propor tion of current liabilities Therefore, effective management of inventory and accounts receivable/payable is

crucial in DBC's working capital management, significantly influencing its operational

efficiency

2.4.2 Sources of Working Capital Funding

Data from the table indicates that only the net working capital in 2021 was positive,

whereas in 2022 and 2023, it was negative This shows:

All of DBC's current assets in 2021 were financed by stable (long-term) sources of Capital Specifically, net working capital of 465 billion VND was mobilized, with the

net working capital ratio over total working capital at a high level of 15.2% This

demonstrates that in 2021, DBC had a relatively stable financial structure with low financial risks and payment risks

In the financial structure of 2022 and 2023, DBC's long-term assets were not entirely financed by long-term sources, resulting in 100% short-term debt financing for current assets This indicates that DBC had to finance a portion of its long-term assets with

short-term capital Specifically, the absolute shortage of long-term capital to finance long-term assets in 2022 and 2023 was 148 billion VND and 40 billion VND,

respectively This imbalance in financial structure for these two years increased the risk

of high short-term payment inability The primary reason for this is the significant

increase in fixed assets and construction costs, as well as an increase in long-term prepayments (in 2022, DBC constructed large-capacity factories)

2.5 WORKING CAPITAL CYCLE ANALYSIS

Table 2.5 Revenue, cost of goods sold, and sales of Dabaco

in 2021, 2022, and 2023

(Unit: million Vietnamese dong)

1 Net Revenue from Sales and Service 10.812.79511.557.59£11.110.001

3 Revenue Including Taxes 26.040.62°17.732.74!17.411.220

4 Cost of Goods Sold 8.959.836 10.598.05! 9.995.760

5 Inventory 4.023.443 5.215.915 5.499.998

6 Change in Inventory 674.550 1.192.472 284.083

7 Selling Expenses 405.236 403.170 432.440

8 Administrative Expenses 344.481 343.521 356.356

9 Depreciation of Tangible Fixed Asset 2.145.784 2.501.702 2.919.460

10 Depreciation of Finance Leased As: 170.719 133.836 149.066

11 Total Depreciation Expenses 2.316.503 2.635.538 3.068.526

Inventory 3.348.895 4.023.44¢5.215.9155.499.99&

Accounts payable 1.012.19€1.392.4662.129.21&5.499.99&

(Source: Self-synthesized group) The calculations are compiled in the following table:

Table 2.7 Summary of data from tables 2.3 and 2.4 (1)

(Unit: million Vietnamese dong)

Table 2.8 Summary of data from tables 2.3 and 2.4 (2)

(Unit: million Vietnamese dong) Fluctuations in working capital according to targets 2022 2023

A WC (Accounts receivable collection period) 104.177,9€ -43.540,45

A WC (Accounts payable payment period) 286.225,4: 2.146.964,4

A WC (Working capital cycle) 77.481 ,8€ -1.189.686,0:

(Source: Self-synthesized group) From tables 2.7 and 2.8, we can observe that the company's operating cycle extends each year Specifically, the inventory holding period also increased significantly, with

an approximately 9-day increase from 2021 to 2022, and a further substantial increase

to over 36 days in 2023, indicating that the company is facing challenges in selling

inventory and has seen an accumulation over the years This may be attributed to the impact of the COVID-19 pandemic during the 2021-2023 period Therefore, DBC has continuously needed to supplement its working capital, reaching its peak in 2023 with

over 1 trillion (3) Detailed analysis of the figures is as follows:

Compared to 2021, the operating cycle in 2022 increased by 10,93 days (approximately 11 days) This result was influenced by Dabaco extending its accounts

receivable collection period by 2,11 days (approximately 3 days) and its inventory holding period by 8,82 days (approximately 9 days) However, due to a decrease in the accounts payable payment period by the seller of 7,40 days (approximately 8 days), the cash conversion cycle increased by 3,53 days (approximately 4 days)

By 2023, reducing the cash conversion cycle by 23,48 days compared to 2022,

achieved a saving of 1,189,686.09 million VND for the enterprise Specifically, reducing the accounts receivable collection period by 0,9 days and increasing the

inventory holding period by 36,04 days contributed to additional funding for inventory

and accounts receivable of 957,278.34 million VND However, increasing the accounts

payable payment period by the seller by an additional 58,62 days resulted in a decrease

in working capital demand by 2,146,964.43 million VND

In 2023, DBC extended its accounts payable payment period by nearly 59 days

compared to 2022, indicating the company's prolonged use of suppliers' capital, despite facing challenges in sales However, DBC maintains a certain level of credibility and receives considerable support, thereby shortening the working capital cycle by more than 23 days in 2023 compared to 2022

Consequently, although DBC's inventory holding period has significantly increased over the years, boosting working capital to fund the operating cycle to over a trillion,

22