Valuation and some recommendations for PINACO JSC stakeholders

It then draws on the experience of the analysis and valuation to be able to properly value the value of the business Suggest solutions to perfect valuation methods that are close to the

PREFACE

Vietnam's economy has been recovering strongly in recent years, creating favorable conditions for the stock market to develop However, the size of the market is still relatively small and there is a lot of potential for a future boom In order to create a healthy competitive market, specialized analytical studies are required, especially studies on market volatility, changes in business lines, price fluctuations of the stock, the risks of investors when entering the stock market Recognizing this, I decided to choose the subject: “ALTERNATIVE METHOD TO DETERMINING INTRINSIC VALUE: THE CASE OF PINACO – DRY CELL AND STORAGE BATTERY COPORATION” PAC shares are one of

the stocks that have received a lot of market attention, including individuals and organizations However, there are still not many in-depth reports from financial institutions, besides the information about PAC still asymmetric information phenomenon in the market So, I make this report with the aim of providing the most objective, unbiased information about the PAC stock code combined with the investment advice of the clients of the internship-company and small investors in the market In addition, the report also shows a part of the process of securities investment analysis and securities dealing at the company, thereby helping the company to perfect these processes

The content of this report mainly focused on analyzing performance of PINACO over years, combine with the fluctuation of macroeconomic and industry, so that can release assumptions to build a pricing model for PINACO stock and give results

at last The report also consults information and calculation of the other pricing report of securities companies to have an objectivity look about PINACO stock

I have tried to be extremely meticulous in preparing this report despite the various limitations faced as very limited information about surgical industry

1 Objectives of the study and research question

Research on a number of theoretical issues on company value and valuation, methods of company valuation and application of those methods to valuation of PINACO JSC It then draws on the experience of the analysis and valuation to be able to properly value the value of the business

Suggest solutions to perfect valuation methods that are close to the value of the business

Witch those objectives, the research question of thesis is:

“Identify the fair value of PINACO JSC”

2 Subjects of study scope

The thesis focuses mainly on the application of valuation methods to PINACO Joint Stock Company, which originated from the research of business activities of the company from 2015 – 2019, with the company's future plans to assess its financial position and determine its value through future cash flow projections and comparisons with other peers

4 Research Methodology

To clarify the research topic, the thesis mainly uses the following methods: comparison method, synthesis method, descriptive method, analytical method, predictive method The analysis will follow the general theories of enterprise analysis and valuation

Detailed of methods applied will be presented in Chapter 1

5 Structure of the thesis

In addition to the table of contents, preamble, conclusion, list of references and annex tables, the thesis consists of three chapters:

Chapter 1: Literature review

Chapter 2: PINACO financial analysis

Chapter 3: Valuation and some recommendations for PINACO JSC stakeholders

CHAPTER 1: LITERATURE REVIEW

1 Definitions

1.1 Stock

A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation This entitles the owner of the stock to a proportion of the corporation's assets and profits equal to how much stock they own Units of stock are called "shares" Stocks are bought and sold predominantly on stock exchanges, though there can be private sales as well, and are the foundation of many individual investors' portfolios These transactions have to conform to government regulations

which are meant to protect investors from fraudulent practices (Investopedia, 2020)

Stock is a type of securities, issued in the form of a certificate, or book entry, confirming the lawful rights and interests of investors when engaging in business activities of the enterprise The stockholder becomes a shareholder and at the same time they become the owner of the issuing company Some stocks are paid monthly, quarterly or annual dividends In Vietnam stock market, a stock represents 10,000 dong of charter capital of enterprises

There are two common types of stocks: common stock and preferred stock Shareholders owning common stock are often allowed to freely transfer and vote on the company's decisions at the General Meeting of Shareholders, to receive dividends according to the business results and the value of the shares they are holding In contrast, the shareholders holding preferred stock have limited powers and responsibilities such as: fixed income, no right to vote or stand for election However, shareholders who own preferred stock always receive the dividend at first, and when the company goes bankrupt, they are also the ones paid by the company before the others

1.2 Stock market

A stock market is a collection of people who buy and sell stocks (or securities), which represent their ownership of a company; they may include stocks listed on a public stock exchange, or shares publicly traded, such as shares of a private company are sold to investors through community fundraising platforms The investments in the stock market are mostly made through stock brokers and online trading platforms (Hayes, 2020)

In the stock market, there are many large companies listing their shares on a certain stock exchange This makes their stocks more liquid and thus attracts more investors The exchange also acts as a guarantor for the trading Other stocks can be traded "over the counter" (OTC), meaning through agents Some big enough companies even list their stocks at more than one exchange in different countries to attract investment from abroad

There are three biggest securities trading markets in Vietnam today include: HNX, HOSE, UPCoM and OTC decentralized stock market

1.3 Business analysis

Business analysis is a research process to assess the entire business operations of the enterprise in order to clarify the quality of business operations: influential causes, potential resources should be exploited Therefore, proposing measures to improve business efficiency in the enterprise

There are some main roles of business analysis:

 It is a tool to detect potentials; improve management regulations in business

 The basis for making the right decision in the functions of managing, inspecting, evaluating and operating business activities Allowing businesses

to recognize properly their capabilities, strengths and limitations to identify the right business objectives and strategies

 An important measure to prevent risks

 Through analyzing the business activities of external entities, enterprises have made the right decision in cooperating with enterprises

1.4 Valuation

In finance, valuation is the process of estimating the present value (PV) of an asset Valuations can be done on assets (for instance, investments in marketable securities such as stocks, options, business enterprises, or intangible assets such as patents and trademarks) or on liabilities (e.g., bonds issued by a company) There are many reasons are needed for valuation such as investment analysis, merger and acquisition transactions, capital budgeting, financial reporting, taxable events to find out the proper tax liability, and in litigation

Valuation models: are models created by investment analysts for the purpose of determining the value of financial assets These models have inputs that are collected from available information sources about assets such as financial reports, information on similar products, market movements, and so on Then, this information is processed through calculations and analysis combined with the subjective judgment of the user model, and then the output is the intrinsic value of the financial asset

discounted future income generated by the asset to obtain the present value (Bodie, 2013)

Intrinsic value exists objectively, no one can impose it, even its owner The objective value of intrinsic value is the total value of tangible and intangible assets that are working at the issuing organization Therefore, intrinsic value also reflects

the potential of businesses and is the economic basis of market prices Market prices are always volatile, but often revolve around intrinsic value, cannot escape too far, too long intrinsic value

Factors affect the intrinsic value:

- Business results If the business is profitable, a percentage of the profits is reinvested, the tangible assets will increase, the intrinsic value will rise accordingly On the other hand, if a loss happens, the tangible asset will fall, and the intrinsic value will decrease These increases and decreases are the consequence of changes in assets, owners' equity in the books of account and financial statements

- The formation of intangible assets (trademarks, patents, inventions, human resources, prestige of enterprises ) This element appears in the form of business, but is difficult to calculate in cash as a tangible asset Thus, it is often not reported or reflected incorrectly in the financial statements However, it has a very strong impact on business results

2 Main methods to analyze company

Company analysis is a process that includes analysis of the company's financial situation, products, services, and competitive strategy (the company's plan to deal with threats and opportunities from external environment) This analysis takes place after the analyst understands the external environmental impact on the company, macroeconomics, demographics, government, technology and society affecting the competitive structure of the industry

Present accurate and specific results: The analysis of a company, whether by down or bottom-up, is intended to determine the investment opportunity However,

top-if only based on the indicators in the reports, investors can hardly make the most accurate decision Company valuation is an option that summarizes the company analysis process, providing the most practical basis for comparison in investor decision-making

2.1 Comparative method

The comparative method of enterprise financial analysis is quite popular and widely used not only in financial analysis but also in the field of economic analysis The comparison aims to highlight the differences and characteristics of each business Through this it is possible to find out trends and laws of market fluctuations Entities, individuals or groups can rely on it to make the right choice Briefly, by comparing two or more things you have a scope of discovering something unknown about either one of the products which are compared

Based on that, the types of the comparative method including:

 Relative comparisons: Managers will understand the relationship, structure, fluctuation trends, growth rates as well as the laws of fluctuations of economic indicators There are several types of relative figure that are often used by financial analysts

 Absolute comparison: This method of comparison reflects the size of the research criterias, financial analysts can clearly see the fluctuation in the size

of the mid-term research criteria with the original

Advantages of comparative method:

- Comparative method is widely used in many countries around the world when there are the differences in core values, dimensions, products of the company, etc This method does not have a fixed model or formula, but based on the information market to analyze the business

- This method illustrates an appreciation of market value, hence having a solid basis for being recognized by customer and recognized by legal authorities as well

- It is the basis for many other valuation methods The analyst often uses a direct comparison method in combination with other methods to determine the company’s position in the market

Disadvantages of comparative method:

- Having more accurate information is essential If the market information is not correct, comparative method cannot be used

- The parameters of the company fluctuate daily lead to analysis results will be wrong if the information is not updated in time Hence, in the context of market fluctuations the information becomes obsolete quickly in a short time

- Only can use this method with the competitors or companies which have same product line

- Analyst must have extensive experience in market knowledge That is, the analyst must identify and analyze the strengths and weaknesses of the documents collected and used in the comparative analysis

- There is some amount of cost to make the updated information

2.2 Financial statement analysis

This method is widely used in financial analysis as it is based on the normative significance of financial ratios in financial relations

Percentage method enables analysts to efficiently exploit the data and systematically analyze the types of rates in a continuous time series or in stages Through that, economic and financial information is improved and more fully provided This enables data accumulation and accelerates the calculation of a series

of ratios such as:

- Solvency ratio: Used to assess the ability of enterprises to meet short-term debts

- Proportion and ability to balance capital, capital structure and source of capital: This indicator reflects the level of stability and financial autonomy

- Proportion of business operation capacity: This is a group of indicators specific to the use of resources of enterprises

- Proportion of profitability: reflecting the overall efficiency of production and business of the enterprise

Analysis and measurement of financial ratios (each year including past and future projections) When evaluating the performance of a business, the key issue is to compare the indicators listed above over time and with other firms The company's financial reports provide important data on the impact of sector factors on the performance of the company and the success of its previous strategies It also provides the basis for setting assumptions to predict the company's cash flow

Advantages of financial reporting analysis:

- Analyzing the financial statements not only serves the subjects who are managing the business but also provide information to the subjects concerned about the "health" situation of the business

- Meet two goals of the business:

o Decision-making purpose: Based on information from specific figures, the analysis will focus on the strengths of enterprises such as capital index, liquidity ratio, etc

o The purpose of investing in a business or leaving a business: This analysis requires much more depth: because in addition to analyzing financial elements such as analyzing financial reporting systems, Many of the non-financial indicators such as human resources, marketing, welfare, difficulties of the enterprise From then to set up groups of solutions to overcome or increase in business activities

Disadvantages of Financial reporting analysis:

- Inflation can affect and distort financial information recorded on financial statements, making calculations and analysis inaccurate

- Seasonal factors also affect the performance of the company and make the financial ratios tend to change abnormally

- Analysis based on financial ratios depends largely on the accuracy of the financial statements This is largely influenced by accounting principles However, accounting principles and practices may vary among companies, industries, countries, and in different periods of time Therefore, the

principles of accounting practice can distort and undermine the meaning of financial ratios

- Managers can take advantage of accounting principles to actively create financial ratios as they want, making financial reporting analytically no longer an objective assessment tool

- Sometimes the company has some very good scores, but some other bad ones make the overall assessment of the company's finances turns difficult and meaningless

- There are many large-scale companies operating in different sectors, even in very different sectors, so it is difficult to develop and apply meaningful sector-wide ratios in these companies Hence, financial analysis is usually most meaningful in small companies and has no multi-sectoral activity

- There is no unified and uniform formulation of some indicators in books and documents on analysis of financial statements This makes comparison of data analyzed between different sources potentially riskier

2.3 Dupont analysis

The Dupont Model is a technique used to analyze a business's profitability with traditional efficiency management tools The Dupont model integrates many elements of the income statement with the balance sheet In financial analysis, Dupont model is used to analyze the relationship between financial indicators It is through the analysis of the linkage between financial indicators that we can identify

factors that affect the analytical performance in a certain order (Hargrave, 2019)

From the perspective of equity investors, one of the most important criteria is the return on equity (ROE) Since equity is part of the total capital formation of an asset, the ROE will depend on the return on total assets This relationship is shown

by the Dupont model as follows:

Figure 1- Structure of Dupont

ROE = Net Profit Ratio x Total Assets Use x Financial leverage

Net margin: Expressed as a percentage, net margin is the revenue that remains after subtracting all operating expenses, taxes, interests and preferred stock dividends from a company's total revenue

Asset turnover ratio: This ratio is an efficiency measurement used to determine how effectively a company uses its assets to generate revenue The formula for calculating asset turnover ratio is total revenue divided by total assets As a general rule, the higher the resulting number, the better the company is performing

Equity multiplier: This ratio measures financial leverage By comparing total assets

to total stockholders' equity, the equity multiplier indicates whether a company finances the purchase of assets primarily through debt or equity The higher the equity multiplier, the more leveraged the company, or the more debt it has in relation to its total assets

DuPont analysis involves examining changes in these figures over time and matching them to corresponding changes in ROE By doing so, analysts can determine whether operating efficiency, asset use efficiency or leverage is most responsible for ROE variations

Advantages of Dupont analysis:

- Simplicity: This is a very good tool to provide people with basic knowledge that will positively impact the business results of the company

- Can be used to persuade management to implement a few reform steps to professionalize the purchasing and sales function Sometimes the first thing

to do is look at the situation in the company Rather than seeking to take over another company to increase revenue and gain economies of scale to offset weak profitability

- The DuPont analysis model provides a more accurate assessment of the significance of changes in a company's ROE by focusing on the various means that a company has to increase the ROE figures The means include the profit margin, asset utilization and financial leverage (also known as financial gearing) A company can improve any or all of these elements to increase value and returns to shareholders through its management of costs, choices of financing and usage of assets DuPont analysis helps investors pinpoint the source of increased or decreased equity returns

Disadvantages of Dupont analysis:

- Based on basic accounting data but may not be reliable

- Excludes cost of capital

- The reliability of the model depends entirely on the hypothesis and the input data

2.4 SWOT analysis

SWOT is a collection of abbreviations of the first letters of English words: Strengths, Strengths, Opportunities and Threats - common model used in business analysis

SWOT analysis is an important factor to create a business production strategy of the business Through SWOT analysis, businesses will clearly see their goals as well as factors inside and outside the organization that can positively or negatively affect the goals set by the business In the planning process, SWOT analysis serves as the most basic and highly effective tool to help businesses have an overall view, not only about the business itself but also the factors that are always influential and determine the success of the business

- The strength is the advantage of the enterprise, project, product These must be outstanding and unique characteristics that the business holds when compared to competitors

- Weaknesses are the detrimental factors that businesses are having

- Opportunities are external environmental impacts will make your business more convenient to develop

- Threats are external factors are causing difficulties for businesses on the road

to success is the risk (or challenge)

Advantages of SWOT:

- One of the biggest advantages of SWOT analysis is that it has no costs involved It is an analytical process that anyone who does business can reasonably complete, and therefore, does not require the involvement of experts or consultants This is an effective method to analyze projects and proposals in a company of any function or industry

- The premise behind the SWOT analysis is to identify strengths, weaknesses, opportunities and challenges in the concept being analyzed The ideal outcome for a company is to maximize its strengths and minimize its weaknesses so it can take advantage of the opportunities listed above, overcoming the identified risks

- Help create new ideas for businesses By looking at the issues that appear in columns and SWOT analyzes It not only raises awareness of potential advantages (and disadvantages) and threats but can also help us respond more effectively in the future, planning to prepare when risks

Disadvantages of SWOT:

- In-depth analysis results: Normally, SWOT analysis is quite simple, it is often not provided If the company is solely focused on project preparation based on the SWOT Analysis, it is not comprehensive enough to assess and set goals For example, a long list of problems cannot be solved by strengths and weaknesses

- SWOT analysis techniques can be simple and easy to grasp, but a lot of research and analysis is needed to get a full picture

- To analyze the impact on a company's performance, business decisions must

be based on reliable, relevant and comparable data However, collecting and analyzing SWOT data can be a subjective process that reflects the bias of the individuals conducting the analysis In addition, input data for SWOT analysis can become obsolete quite quickly

3 Main methods to determine company intrinsic value

In fact, analysts use a variety of pricing models ranging from simple to complex valuations These models are based on many different assumptions but have some common characteristics and are categorized into different categories The classification of valuation models offers several advantages: it facilitates model identification, explains why models produce different valuation results and when models are acquired Basic logic errors In Vietnam, there are only two methods, the method of asset and discounted cash flow method, used in the valuation of enterprises in the process of privatization of SOEs and legal corridors The financial treatment and valuation of enterprises for the purpose of equitization of SOEs are guided in detail in Chapter II and Chapter III of Circular 109/2007 /ND-CP However, the guiding circular of the decree is also the Circular No 146/2007/ TT-

BTC of the Ministry of Finance, specifying additions to the two valuation methods mentioned above The analyst may apply other valuation methods to determine the value of the equitized enterprise The method of valuing this enterprise must be scientific, reflecting the intrinsic value of the enterprise and widely applied internationally Currently, theoretical business valuation methods have three main groups of methods, including:

 Method of valuation of assets

 Discounted cash flow method

 Relative pricing method

 How to determine the commercial advantage

EPS (earning per share),

(Price / earnings ratio of the industry in which the business is operating

Advantages of P/E valuation:

- Pretty simple, easy to calculate

Disadvantages of P/E valuation:

- In the calculation formula, there is a factor P (Price) - the market price of the stock, so if the stock market operates unstable, the stock price is affected by

speculative factors, market manipulation then the P / E ratio will be skewed and affecting the calculation results

3.2 FCFF Method (Free cash flow to firm)

FCFF's net cash flow is the total cash flow of all subjects having interests in the enterprise (including: Creditors and Owners (shareholders))

FCFF's net cash flow reflects: the post-tax cash flow from business activities is distributed to both creditors and business owners (regardless of the capital structure

- Suitable for businesses that use high financial leverage or are in the process

of changing financial leverage

Disadvantages of using FCFF:

- Enterprises are priced based on cash flow before interest, which can cover the risk of financial structure

- The debt ratio used in the WACC requires the business to make an unreasonable assumption: the enterprise must pursue and maintain the debt ratio in the future, although this may be detrimental to the business

- This method is also sensitive to the assumption of annual growth

3.3 FCFE method (Free cash flow to equity)

The FCFE equity net cash flow is the total after-tax cash flow reserved for business owners

The FCFE's net cash flow from equity reflects: the after-tax cash flow from business activities is distributed to business owners, after repayment of interest and loans to creditors, payment of new investment costs and changes in working capital needs

The formula for FCFE is:

FCFE = Net Income + Dep +/- Net change WC +- Net Capex+- Net borrowings

The FCFE equity cash discount method has the same advantages as the FCFF method, but this method gives more accurate results, especially for businesses that implement low dividend payment policy

Advantages of using FCFE:

- The results obtained from this model are much better than the dividend discount model when estimating the equity value of companies paying dividends lower than FCFE

Disadvantages of using FCFE:

- The steady growth rate at the next stage must not exceed the nominal economic growth rate

CHAPTER 2: PINACO FINANCIAL ANALYSIS

1 Overview about PAC company

Stock information:

Listing: Pinaco is approved by the Ho Chi Minh Stock Exchange

Listed on 12/12/2006 according to Decision No 69/UBCK-GPNY on 09/11/2006 Type of stock: Common stock

Stock code: PAC

Par value: VND 10,000 / share

Volume of shares: 46,471,707 shares

Vision: become the leading battery and battery manufacturer in Southeast Asia, reaching out to Asia and the world

Mission: provide safe, effective and reliable energy solutions to customers

Core value: follow these 4 principles:

- Integrity: respect professional ethics, behave fairly in relationships inside and outside the company

- Attentive: customer oriented, best meet the requirements of customers inside and outside the company

- Commitment: upholding personal responsibility, proactively developing skills to become more and more professional

- Sharing: building team spirit - working for the benefit of the company

1.2 Milestones

- 1976: The company's precursor, Dry Cell and Storage Battery Company, was established by the Chemicals General Bureau (currently Vietnam Chemicals Corporation) on the basis of nationalization of factories of Vidopin, Con Meo Dry Cell, Hot Xoan Dry Cell, VABCO and VIDECO storage battery production

- 1993: Reestablished Dry Cell and Storage Battery Company (Pinaco) directly under Vietnam Chemicals Corporation by Ministry of Trade and Industry

- 2003: Invested a new project, Saigon Storage Battery factory in Tan Tao Industrial Park

- 2004: PINACO officially transformed into joint-stock companies, according to business registration certificate number 4103002690 issued by Department of Planning and Investment of Ho Chi Minh City for the first time on 23 September

2004

- 2006: Listed on Ho Chi Minh Stock Exchange according to Share Listed License

No 69/UBCK-GPNY of the State Securities Commission and officially implemented first transaction on 12 Dec 2006 with a transaction price of 40,000 VND per share and stock code of PAC

- 2011: Invested and constructed a new battery production plant in Nhon Trach, Dong Nai (Dong Nai 2 Battery Enterprise)

- 2015: Charter capital was increased to VND309,812,930,000

- 2016: Charter capital was increased to VND464,717,070,000

- 2017: Implementing the production re-planning at the factories

- 2018: Buy 8.7 ha in An Phuoc industrial area, Dong Nai province

1.3 Main business scope

The main activities that generate revenue and profit of the Company are as follows: Producing dry cell batteries and shortage batteries: Providing a variety of batteries and batteries for domestic and export markets Including common types of zinc carbon battery and types of batteries for many purposes such as: starter batteries for cars, motorcycles, boats; Civil batteries for lighting, electric vehicles and industrial batteries of all kinds, etc

Trading in, importing and exporting battery products, batteries and supplies, equipment for battery and battery production and trading

1.4 Main product

The products of PINACO have achieved leading quality standards with technology transferred from Europe, Japan, produced on advanced the machinery, equipment of Austria, the USA, Germany, England, Italy, etc and advanced management system, met the stringent requirements of many customers and the world leading automobile and motorbike assembly companies in Vietnam, including Ford Vietnam, Suzuki Vietnam, Honda, Piaggio, Yamaha, Mercedes - Benz Vietnam, etc,

- Battery: having products with bands such as Con O, Eagle with sizes as follows:

AA size: AA, UM3, R6P, LR6 AAA size: AAA, UM4, R03, LR03

D size: D size, UM1, R20

- Storage battery: having products with brands such as Pinaco, Dong Nai, JP, PAC, Sakura, used for following applications:

o For vehicles, trucks, ships;

o For motorbikes:

o For lighting, UPS, mosquito rackets, rechargeable lights, electric bicycles, etc…

1.5 Business location

Domestic market: The company has a Head Office in District 1, Ho Chi Minh City,

3 enterprises for storage battery and 1 enterprise for battery – all are located in Ho Chi Minh City and Dong Nai Province 2 branches in Hanoi and Da Nang; 06 showrooms are also established in HCMC, Hanoi and Da Nang to operate the distribution system in whole the country The business locations are covered whole the country

Distributors and agents: The company has the system of distributors/agents covering all over the country and the staff who regularly monitor the market, support the distributors for sales, deploy promotion programs and support the product warranty The efficient distribution system has helped the company successfully compete in the market and serve the customers well This has created the difference between the service quality of PINACO as compared to other companies of same sector in the market

Supermarkets and stores: Pinaco's products are available in supermarkets and stores

1.6 Export

Export has contributed about 18% of total revenue As of the end of 2016, the company exported to more than 31 countries and territories The company maintained its exports to traditional markets in the Middle East, South East Asia, Africa, Latin America, etc… as Cambodia, Hong Kong, Myanmar, Nigeria, Algeria, China, Thailand, Sri Lanka, Lebanon, Jordan, Sudan, Syria, etc., and three new markets, Afghanistan, Yemen and Indonesia

1.7 Typical customer

PINACO is a supplier of batteries for most of the manufacturers of motorcycles and cars which have factories in Vietnam such as: Ford, Huyndai, Honda, Yamaha, Kia, Thaco, ect

As of April 20, 2019, foreign investors own 28.2% of the shares, of which Furukawa Battery (FB) holds 10.5% and is the second largest shareholder FB is one of Japan's largest battery manufacturers, established in 1914 based in Yokohama, Japan and have 2 subsidiaries in the same industry in Thailand and Indonesia Mr Shinichiro Ota, representative of FB, is currently on the board of PAC PAC's foreign room is 49%, so the remaining room of 20.8% creates favorable conditions to attract foreign partners in the State divestment

1.9 Organization’s Structure

Figure 3 - Organization's Structure of PAC

(Source: PAC’s annual report)

2 Macroeconomic analysis:

Vietnam’s development over the past 30 years has been remarkable Economic and political reforms under Đổi Mới, launched in 1986, have spurred rapid economic growth, transforming what was then one of the world’s poorest nations into a lower middle-income country Between 2002 and 2018, GDP per capita increased by 2.7 times, reaching over US$2,700 in 2019, and more than 45 million people were lifted out of poverty Poverty rates declined sharply from over 70 percent to below 6 percent (US$3.2/day PPP)

Given its deep integration with the global economy, Vietnam has been hit hard by the COVID-19 pandemic While the macro-economic and fiscal framework remains resilient with a reported GDP growth rate of 3.8 percent in the first quarter of 2020, the impact of the ongoing COVID-19 crisis is hard to predict, given the uncertainty surrounding its magnitude and duration Nevertheless, the economic growth is expected to slow down to 3-4 percent in 2020 compared 6.5 percent pre-crisis projections

Figure 4 - GDP growth per quater and segment

(Source: KBSV)

Despite Vietnam's large open economy, participating in many new generation trade agreements with other countries and regions In addition to the opportunity to expand export markets, the company faces fierce competition with similar products imported from developed countries

Vietnam is experiencing rapid demographic and social change Its population reached 97 million in 2018 (up from about 60 million in 1986) and is expected to expand to 120 million by 2050 Today, 70 percent of the population is under 35 years of age, with a life expectancy of 76 years, the highest among countries in the region at similar income levels But the population is rapidly aging And Vietnam’s emerging middle class, currently accounting for 13 percent of the population, is expected to reach 26 percent by 2026

Figure 5 - Age structure of Vietnam in 2019

(Source: PopulationPyramid.net)

The economy is growing rapidly and the young population is creating a plentiful supply of labor to meet the employment needs of the company especially after the company re-plans production

3 Industry Analysis

According to a survey of consulting firm - market research Grand View Research, Inc (GVR) of the US, the size of the global automotive battery market is estimated

to reach 95.57 billion USD by 2025

Figure 6 - Consume cars and motorcycle in some country of ASEAN

(Source: Tapchitaichinh.vn)

Vietnam is an attractive market for any battery manufacturer Because, only motorcycles, according to Pew Research Center, Vietnam ranked second in the world in terms of the percentage of households owning motorbikes with 86%, while the leading country, Thailand, is only slightly higher with 87% However, the figure for owing cars ranked fourth in ASEAN

Figure 7 - Market share of PAC in Viet Nam

(Source: PAC, RongViet Securities)

PAC is currently the leading enterprise in battery and battery market In fact, the company's automotive battery products account for 40-45% of the country's market share and this is also the segment that contributes the largest proportion of revenue

to the company

Specifically, the strength of PAC lies in water battery products for cars, as this segment accounts for 65% of the domestic market share Meanwhile, with the promising dry battery segment in the future, PAC must share market share with GS

- the company's biggest competitor at this time In addition, due to its inability to compete with Globe motorcycle brand, PAC's market share in this segment is only

at 7%