Professional Documents
Culture Documents
I. Company Introduction
1. General Information Vietnamese name English Name Abbreviation Stock code Head office Market capitalization Outstanding shares Listed date Website 2. Brief History Establishment: Precursor of DHG Pharma was 2/9 Pharmaceutical Factory and was founded on September 2nd 1974. On 02 September 1974, the Company was changed into a Joint-stock Company with the initial charter capital was 80 billion VND. Increase in charter capita Time Aug/2007 Dec/2007 Dec/2009 Dec/2010 Charter capital before increased 80.000.000 100.000.000 200.000.000 266.629.620 Added amount 20.000.000 100.000.000 66.629.620 2.500.000 Charter capital after increased 100.000.000 200.000.000 266.629.620 269.129.620 Cng ty C phn Dc Hu Giang DHG Pharmaceutical Joint-Stock Company DHG PHARMA DHG 288 Bis Nguyen Van Cu, An Hoa Ward, Ninh Kieu District, Cantho City VND 3,909.98 billion 65,166,299 shares 01/12/2006 http://www.dhgpharma.com.vn
Milestones 1996: The first year that DHG Pharmas products was elected as Vietnam High Quality Goods by customers. (15 years consecutive). The first year that the factories complied with the GMP standard. The first year that DHG Pharma being the leader of Vietnam pharmaceutical industry until now. 2004: Equitization 2006: DHG being listed on HOSE
3. Business Scope Pharmaceutical products manufacturing Export of pharmaceutical materials and pharmaceutical products Import of drug manufacturing equipment, pharmaceutical products and medical equipment Production and export of processed food items Printing packages Trading of foreign currencies
Resembling, installing and repair of electrical products Travel services and inbound transportation
Despite the financial downturn recently, DHG enjoyed a consistently increasing revenue and net income.in 2011, DHG had impressive growth in revenue and net profit for the shareholders of the parent company with an increase of 22.4% and 13.1%. The companys impressive revenue growth is due to 1) increase production capacity to 406 billion product units, up 23% over the same period last year; 2) sales promotion strategy was launched earlier than usual and 3) increased average selling prices by 11.3%. DHG has improved productivity and cost savings in 2011 effectively by improving production processes. Specifically, the company has focused on reducing bottle neck production stages and concentrated on production line running certain product at each stage, therefore, reducing waiting time. This change increased the production volume by 23%. The increased production along with sales volume up by 10% and average selling prices increased by 11.3% has increased sales revenue by 22.4%, its highest level in the most recent four years. Although fluctuated, both PE and ROE are expected to increase in 2012. This is a good sign showing the improvement of the company. 2. Comparison With Other Companies In The Industry Stock Code DHG DMC IMP OPC TRA Industry Gross Profit Margin 49.3% 32.9% 48.8% 51.8% 33.2% 40.1% ROE 31.1% 16.8% 12.0% 16.4% 24.1% 25.8% ROA 22.8% 11.7% 9.8% 11.6% 13.5% 16.7%
Revenue growth rate of DHG was high (17-18% / year), and profit growth was even higher (2 times faster than revenue growth). This shows that revenue growth of DHG is accompanied by outstanding increase in operating efficiency. This is also reflected in gross margin which was always maintained at 52% / year, along with indicators of ROE, ROA increased continuously from 19.1% and 12.7% in 2008 increased to 31.1% and 22.8% of 2011, and highest among pharmaceutical companies listed and nearly double the industry average.
Weaknesses
Opportunities Threats
pharmaceutical ingredients (APIs), which makes it vulnerable to international currency movements. Underdeveloped primary care services, infrustructure and a shortage of trained pharmacists hamper access to medicines and product market penetration. The Association of South East Asian Nations (ASEAN) harmonization initiative, including the adoption of Western regulatory standards such as International Conference on Harmonization (ICH) and WHO guidelines. Introduction of five-year exclusivity for clinical dossier data encouraging research based multinationals. If investment can be found for technological improvements, then there is great potential in the traditional Chinese medicine (TCM) market, in addition to fledging biotechnology. WTO membership improves the trading climate and in the longer term, redresses pharmaceutical trade issues. Government resistance to aligning patent law fully with international standards deterring multinational sector expansion. Pharmaceutical price inflation threatens to put medicines out of reach of poor and therefore limit market volume growth. Legalization of parallel imports negatively impacting performance of patented drugs. New health insurance legislation decreasing patients access to medicines.
V. Stock Valuation
Applying Earning model in DHGs stock and firm valuation Using CAPM to observe required rate of return k for DHG: k = rf + [E(rM) rf] Input data: rf = 12,89 % ( 5 year bond yield in 2012) = 0.34 (source: cafef.vn) E(rM) rf = RMP = 12.1% We have the required rate of return: k = 12.89% + 0.71 * 12.1% = 21.481% In 2012, DHG has a dividend policy with 20% payout ratio, so the reinvestment rate = b =80% ROE2012 = The fair value of DHG: expected =
( )( )
= 23.9%
= 10.1x
EPS = 6,830 VND Expected or fair value of DHG = 6,830 *10.1 = 68,983 VND /share
The market value of OCH in current is 8.64 x (cafef) The market price at 25/5/2013 is VND 59,000.0
We have conclusion here fair > of DHG currently in the market . The fair price > the current market price. Decision: So, DHG stock has been underestimated in the market. This can conclude that in current, DHG has been undervalued and is a potential stock. Investors should hold or even buy the stocks.
Appendix
Financial Ratios Stock price over 2011 -2012