1

Assignment 3: Nam Kim’s financial analysis

Group 1

Thai Son (THAS19028604)

Huynh Phuoc Long (HUYP08108101)

Pham Thi Bich Ha (PHAT08548106)

Dao Ngo Nguyen Hanh (DAON20548408)
Le Thanh Huyen (LEXT29628900)
NAM KIM’S FINANCIAL ANALYSIS 2

Table of Contents
PART A: INTRODUCTION ........................................................................................................ 3
I. Company profile at a glance .................................................................................................................................3

II. Steel’s Industry at a glance ................................................................................................................................... 4

III. Prospect for Vietnam Steel Industry in 2022 .........................................................................................................5

PART B: HORIZONTAL ANALYSIS ............................................................................................ 6

I. Definition of Horizontal analysis ...........................................................................................................................6

II. Income statement items (Sales, COGS, Gross Profit, Net Profit) ...........................................................................6

III. Balance Sheet (Cash, Trade Payables, Trade Receivables, and Inventory) .........................................................10

PART C: RATIO ANALYSIS ..................................................................................................... 13

I. Profitability .........................................................................................................................................................13

II. Asset efficiency....................................................................................................................................................15

III. Liquidity or short-term solvency ..........................................................................................................................16

IV. Capital structure ................................................................................................................................................. 18

V. Market performance ...........................................................................................................................................19

PART D: CONCLUSIONS AND RECOMMENDATIONS .............................................................. 20

I. NKG performance summary from year 2019- 2021 (Business Result summary from Y.2019-Y.2021) ...............20

II. Conclusions .........................................................................................................................................................22

1. Industry overview of 2022 .............................................................................................................................. 23

2. SWOT analysis ................................................................................................................................................ 24

3. Group Suggestions and recommendations for NKG company in 2022 .......................................................... 26

DISCLAIMER ........................................................................................................................ 27

References .......................................................................................................................... 28
NAM KIM’S FINANCIAL ANALYSIS 3

PART A: INTRODUCTION

The purpose of this paper is to analyze the financial statements of the listed company in
Vietnam, Nam Kim Steel Joint Stock Company (NKG) and its rival also being the leader in this
steel market Hoa Phat Group (HPG), by horizontal analysis and ratio analysis in the period of 3
years from 2019 to 2021. Subsequently, the strength and weakness of each company based on this
financial data will be pointed out along with the recommendations for business improvement.

I. Company profile at a glance

1. Nam Kim Steel Joint Stock Company (NKG) is a leading coated steel manufacturer in
Vietnam, it was established with the first non-oxidized furnace (NOF) metal coating
line in Vietnam in 2002, located in Binh Duong province. They are mainly focus on
manufacturing and distributing of galvanized steel, color coated steel and industrial
sheets for not only domestic but also for export market in the field of industrial and
civil construction, they also involved in the manufacturing of other iron, steel and cast-
iron products and the wholesale trading of various types of steel and iron products.
NKG has been listed in Ho Chi Minh Stock Exchange Market since 2011. They are in
top 3 Vietnam’s Iron/Steel industry, consisting of HPG, NKG and Hoa Sen Group
(HSG).
NAM KIM’S FINANCIAL ANALYSIS 4

2. Hoa Phat Group’s (HPG) is the leading industrial manufacturing group in Vietnam.
Originating as a construction machine and equipment trading company in August 1992,
and headquartered in Hung Yen, Vietnam. The five sectors of HPG are the Iron and
steel including construction steel, hot rolled coil, the steel products including steel
pipes, galvanized steel, drawn steel wire, pre-stressed steel, Agriculture, Real estate,
home appliances whereas Steel products is core business, accounting for 90% of
revenue and profit. This firm has been officially listed on the Ho Chi Minh Stock
Exchange market since November 2007.

II. Steel’s Industry at a glance

According to the Vietnam Steel Association (VSA), Vietnam’s steel industry had a
remarkable growth in 2021. 33 million tons of finished steel products has been produced and
29 million tons sold, respectively increased 16% and 9%, especially in export whereas more
than 14 million tons of all kinds of steel products was shipped aboard, and the slowing down
from the domestic market due to 4-month of quarantine in the south of Vietnam including Ho
Chi Minh and satellite provinces as well as Mekong delta provinces. The 3 main sectors in the
NAM KIM’S FINANCIAL ANALYSIS 5

Steel market are construction steel, steel pipes, galvanized sheets. Obviously, HPG is not a
direct competitor of NKG, however they both have the same sources of materials, prices being
impacted by iron ore, coke, etc. as well as market trends. (Steel industry expects rosy outlook
for 2022, 2022).

III. Prospect for Vietnam Steel Industry in 2022

According to the report from Vietcombank Securities company (VCBS), China is reducing
the export quota, which causes shortages to their partners who frequently purchase steel from
this country. Subsequently, Vietnam will benefit from this policy as well as the new policies
and strategies from Europe, US, and India market. (Vietnam’s steel industry outlook 2022,
2022).
NAM KIM’S FINANCIAL ANALYSIS 6

PART B: HORIZONTAL ANALYSIS

I. Definition of Horizontal analysis

Horizontal analysis, also known as trend analysis, is a technique for evaluating a series of
financial statement data over different periods. Its purpose is to determine the increase or
decrease that has taken place, expressed as either an amount or a percentage of the deviation.
(Weygandt, J. (2018).
There are two important advantages of using Horizontal analysis. Firstly, this analysis
allows easily indicating the growth trends. It helps to measure the business performance as well
as to detect emerging problems. Secondly, horizontal analysis allows for comparing companies
of different sizes. It shows a company's growth and financial position versus competitors.
However, the accounting numbers can be manipulated which will lead to incorrect data
and inappropriate analysis. Also, the differences in reporting standards will make the data
incomparable.

II. Income statement items (Sales, COGS, Gross Profit, Net Profit)
1. Sales and COGS
a. NKG

The sale revenue was slightly reduced by -5.1% in 2020 but quickly recovered and was
going up by 143.7% in 2021. Drawing the same trend, the COGS was down by -9.7% in 2020 and
up to 123.6% in 2021.
2021 was the explosion year of the steel market, including NKG. Eventually, the sales
increased by 143.7% and the COGS increased by 123.6%. NKG promoted different sale channels,
particularly the export which increased sharply in European and US markets. The proportion of
NAM KIM’S FINANCIAL ANALYSIS 7

this channel accounted for more than 80% of sales volume in the third quarter and 68% of the sales
volume for the whole year.
b. NKG’s competitor – Hoa Phat Group

For the sales, NKG faced a challenging year in 2020 and turned into a spectacular
breakout in 2021 while HPG developed stable growth throughout the last 3 years.
In 2020, two main reasons caused the decrease this year. Firstly, the covid pandemic has
created a serious disruption in the global supply chain because many countries closed to prevent
the disease. Brazil, the world's leading iron ore exporter, must close its large mines which led to a
sudden drop in global supply. Secondly, the steel demand was slowing down because of the United
States and China trade war. Therefore, the HRC steel price was decreased to -10% in the global
market in early 2020 (www.tradingview.com). That leads to the Sales and COGS of NKG are
negatively reduced by – 5.1% and - 9.7% compared to 2019. Also being impacted, HPG, however,
kept the growth at 41.6% of Sales and 35.7% of COGS by owning a highly efficient production
chain. The outstanding competitive advantage in production costs helped HPG grow well in the
Central and Southern markets, thereby increasing the domestic consumption market share to 32%
in 2020, an increase of more than 5% compared to the whole figure of 2019 (VCBS report, 2020).
2021 was a successful year for the steel market, particularly for NKG. The sales and COGs
turned from negative results to 143.7% and 123.6% of increase and double the growth change of
HPG with 66.1% and 52.5% due to the going up of steel price in the global market. Along with
the large demand for construction recovery after the covid pandemic, the price of the input raw
material increased massively which caused the COGS to peak more than 10 years ago, reaching
$882/ton. Due to the impact of the COVID-19 pandemic, the movement of goods was slowed,
interrupted, and could not meet demand, thereby increasing freight rates and empty container
NAM KIM’S FINANCIAL ANALYSIS 8

charges (up 10 times compared to the previous time). This plays a part in the price increase of
HRC steel in early 2021.
From 2019 to 2021, both companies overcame the difficulties quickly and grew by more
than 100% sales in 2 years.
2. Gross and NET profit
a. NKG

Even though the sales did not work well in 2020, the profit illustrated significant and
healthy growth in both 2020 and 2021. The total increase over the two years stayed at 545.6% of
the gross profit (154.3% in 2020, 391.2 % in 2021) and 1,177.4% of net profit (523.8% in 2020,
653,6% in 2021) compared to 2019. This good result comes from the following factors:
 In 2020, NKG successfully integrated the ERP system (SAP – Germany) which helped to
increase productivity, reduce cost, and utilize the market opportunity quickly. Taking the
advantage of raw materials' low price when the market was down, NKG still operated at
full capacity to increase the inventory for the next periods when the market recovered.
 In May 2020, the price of HRC increased 60% from the lowest cost in 4 years leading to a
big increase in gross profit. The strong increase in HRC steel price helped positively
improve the gross profit margin of the enterprise, from 2.8% in 2019 to 7.5% in 2020,
thereby helping the net profit in 2020 to increase sharply by 524%.
 Due to the low-value inventory in the previous period, the ratio of COGS and revenue was
low which raised the profit in late 2020 and 2021.
 NKG decided to not pay the dividend for 2019 and kept undistributed profit for investment
and bought more inventories. In addition, extraordinary profits from land transfer My Xuan
NAM KIM’S FINANCIAL ANALYSIS 9

B Industrial Park also contributed to the profit of 2020 (Vietnam steel industry outlook
2021, Mirae Asset Securities).
 NKG paid off its long-term debt in 2020 and 2021 (-52% in 2020, -64% in 2021). By doing
that, it reduced financial costs which account for 50% of NKG's gross profit. Therefore, it
will increase the gross profit and make the financial health stronger
 The effective corporate income tax rate of NKG at 7.9% is different from the normal tax
rate of 20%. The company is entitled to a 50% reduction in CIT payable in 4 years 2017 -
2020 from Nam Kim factory #2 and a 50% reduction in CIT payable in 4 years 2019 - 2022
from Nam Kim factory #3. Meanwhile, the company is entitled to a tax deduction from the
loss of Steel Pipe Factory in 2019 in 2020. Therefore, the company's tax rate is much lower
compared to the normal rate (VCBS report, 2021).
b. NKG’s competitor – Hoa Phat Group

In terms of profit, both recognized the continuous growth and had the percentage change
of 2021-2020 was higher than 2020-2019 by at least 50%.
In 2020, although the Sales and COGS of NKG had declined, the profit growth of NKG
was much higher than HPG. Sequentially, a 154% increase compares to 69% of gross profit and
a 523.8% increase compared to 78.2% of net profit.
In 2021, with 391.2% gross profit and 653.6% of new profit, NKG created a significant
gap compared to HPG with 117.5% gross profit and 155.6% net profit.
The achievement of NKG was explained in the section on NKG’s profit above, mainly
because of the decrease of COGS by low-value inventory in the previous period and the abroad
markets expansion. NKG often signs 4-5 months forward contracts, the company will be able to
sustain these impressive business results at least until the end of the second quarter of 2022.
NAM KIM’S FINANCIAL ANALYSIS 10

III. Balance Sheet (Cash, Trade Payables, Trade Receivables, and Inventory)
1. Cash and Trade Receivables
a. NKG

The cash trend was going up for both periods 2019-2020 and 2020-2021 to 188.2% and
242.9%, respectively. Besides, the trade receivable was increased to 75.8% and 22.6%
respectively in the period 2019-2020 and 2020-2021.
In 2020, NKG sharply went up from 76 billion VND to 219 billion VND. To build the
huge cash amount, NKG catches the opportunity to stock cheap HRC, raw material, and was
supported by strong demand from both domestic and foreign markets. The key point affecting
the cash trend was trade receivables arising from 692 billion VND to 1.218 billion VND.
In 2021, the cash trend was up significantly from 219 billion VND to 751 billion VND
because NKG inventory increased 249.3% (around 5.910 billion VND) at low value inventory
for the period for later sale.
b. NKG’s competitor – Hoa Phat Group
NAM KIM’S FINANCIAL ANALYSIS 11

The cash trend was going up for both companies while the inventory trend showed the
differences.
In 2020, both companies augmented their cash to about 200%. The volatility of the steel
price was high in 2020 going until April and kept increasing massively reaching the end of the
year. In 2021, NKG continued to increase the percentage change of cash from 188.2% in 2020 to
242.9%. Meanwhile, HPG also increased the positive change but stayed at 64.1% of change
compared to 242.9% the change of 2020-2019.
Increasing the cash would help the companies be safe and get ready for more business
opportunities. They both plan to invest more in building the factory to drop the dependency on
the suppliers, reduce the cost, expand the production, and achieve more profit as a result.
The trade receivables trend was going up for both companies while the trade payables
trend shows the differences again which are aligned with the cash and inventory trend.
In a detail of the linear line, NKG increased the trade receivables by 75.8% in 2020 and
down to 22.6% in 2021. Same direction, HPG reduces from 46.3% in 2020 to 25.9% in 2021.
2. Inventory and Trade Payables
a. NKG

In 2020-2019, inventory and trade payable both went down at -8.4% and -41.1%,
respectively. This issue is reasonable since NKG had no stock. Moreover, according to the
financial statement report in 2020, NKG had no overdue debt.
In 2021-2020, inventory grew 249.3%, i.e. inventory of 5.910 billion VND while trade
payable also increased 355.8% to 3.808 billion VND. According to the financial statement report
in 2021, NKG paid to all suppliers. There were many reasons and opportunities for NKG to build
NAM KIM’S FINANCIAL ANALYSIS 12

up the stock, the biggest reason came from China’s steel export tax up to 25% and the second
reason was China tightening steel supply because of pollution.
b. NKG’s competitor – Hoa Phat Group

In terms of inventory, NKG reduced to -8.4% together with Sales and COGs while HPG
maintained a stable inventory at 35.4%. According to the annual report, the first 700,000 tons of
HPG’s hot-rolled coil were officially launched in 2020 and HPG's steel pipe output reached
820,000 tons, simultaneously output of galvanized steel sheet increased by 150% compared to
2019 (VCBS, 2020).
However, in 2021, NKG inventory moved ahead with 249.3% versus 60.3% of HPG.
NKG actively reserved a large amount of low-value inventory in this period for selling later.
On the other hand of trade payables, the negative -41.1% of NKG in 2020 was the
consequence of the negative inventory. It turned significantly to 355.8% in 2021 when the
market was explored again. More stable within the benefit of the production chain, HPG kept the
ratio at 45.5% and 117.4% for 2020 and 2021.
In the long period, the uptrend of trade receivables and trade payables which is aligned
with sales and profit proved the successful growth of both companies.
NAM KIM’S FINANCIAL ANALYSIS 13

PART C: RATIO ANALYSIS

I. Profitability

Overview, NKG’s profitability ratios has a significant increase over review period from
0.58% to 19.22%. A significant increase ROA in NKG when net profit margin increased
substantially (from 0.39% to 7.9%) and this increase is more than the increase of investment in
assets. Although during 3 years from 2019 to 2021, NKG suffered from the extremely tough period
and step to year 2021 with the severely fourth outbreak of COVID19, NKG has tremendous growth
in 2021. The key reason is due to the prices of key products in NKG, i.e. hot-rolled coil (HRC),
keep increasing and the demand from the European Union and North American markets has
boosted the export volume. While HPG which is known as the No. 1 market share in Vietnam for
construction steel and steel pipes, its profitability ratios have also significant increase when export
activities have made an important contribution to the output in 2021 with 2.6 million tons of
products of all kinds, double that of 2020. According to the Vietnam Steel Association (VSA), the
NAM KIM’S FINANCIAL ANALYSIS 14

exports recorded positive results in 2021. These exports have reached a figure of 11.8 million tons
for 2021, as compared to 9.24 million tons achieved in 2020.
NAM KIM’S FINANCIAL ANALYSIS 15

II. Asset efficiency

There are some key indicators to measure the firm’s effectiveness in asset utilization.

First, the total asset, these metric measures how effective a company in leveraging their
asset to generate sales. In general, NKG consistently outperforms in utilizing their asset over 3
years from 2019 to 2021, which is about 2 times compare with HPG in the same period, especially
in 2021, where the total asset turnover value of NKG is 2.43 while HPG is only 0.97. Look into
the detail, while the total asset of both companies increase significantly in 3 years, respectively for
HPG, it increases 176% from 101,776B VND in 2019 to 178,236B VND in 2021, whereas the
increase is 191% for NKG from 8,064B VND to 15,398B VND in the same period, it apparently
shows how effectively NKG leverage their asset to generate sales, and they are in the top 3 firms
have the good result in this indicator.

Second, the average collection period ratio, it evaluates the effectiveness of a company’s
credit and collection policies, this is the number of day’s sales in receivables, the lower in
collection days, the better in the liquidity of a firm. In this metric, HPG clearly shows a better
result in the collection period, it steadily declines from 14 days in 2019 to 11 days in 2021.
NAM KIM’S FINANCIAL ANALYSIS 16

About NKG, the average collection period ratio is quite high compared with HPG in all 3
years, it is 20 days in 2019 and significantly increases to 30 days in 2020, before dropping to 18
days in 2021. This high ratio in 2020 of NKG is mainly because the short-term receivables
increased 64% while the net revenue slightly dropped about 5%. However, according to the
financial statement, the working capital in 2020 is still 394B VND which means the high average
collection period in this case is not a big concern. And eventually, this issue has been completely
resolved in 2021 whereas the net revenue has significantly raised 241% versus 2020, and the
average collection period declined to 18 days.

Third, the Days in Inventory, it shows the average number of days the inventory is held
during the year, and indicates how fast inventory is used or sold, a lower ratio indicates that a
business is efficient, both in terms of sales performance and inventory management. In this metric,
despite of both NKG and HPG managed their inventory quite stable over last 3 years from 2019
to 2021, however it also shows a better performance from NKG whereas the days in inventory of
HPG is always approximately 30 days higher then this value from NKG, equivalent to 43% higher.
However, it really depends on the firm’s strategy whether they want to keep high stock to serve
their customer better or to reserve the low-price inventory for the future market price increase.

III. Liquidity or short-term solvency

Liquidity or short-term solvency is the ability of a firm to pay its short-term liability.
Inability of pay-off short-term liabilities affects its credibility as well as the credit rating. Short-
term lenders or creditors of a business are really focused on these indicators. Four key metrics
will be concentrated on are current ratio, quick ratio, cash ratio and working capital.
NAM KIM’S FINANCIAL ANALYSIS 17

Over past 3 years from 2019 to 2021, NKG shows the financial position in their short-
term obligation in current ratio become stronger over the year, specifically from 1.02 times in
2019, raised to 1.1 times in 2020 then reached to 1.27 times in 2021 while HPG in this ratio is
also good enough, it shows 1.13 times in 2019, decline a bit to 1.09 times in 2020 then reach to
1.28 times in 2021.

On the contrary, the quick ratio raises some concerns on the financial obligations for both
companies. For NKG, the ratio is around 0.5 times consistently in 3 years while HPG shows a
little bit better in this ratio. The main reason for this is because the total value of inventory and
other current assets account for more than 50% of current assets of these companies which
means the company reserves a plenty of stocks for sales. However, the high inventory value is
quite normal in this industry particularly in the context of the price of the raw materials such as
iron ore, coke, HRC, CRC tends to increase day by day.
NAM KIM’S FINANCIAL ANALYSIS 18

IV. Capital structure

In general, two ratios have been used to assess the strength of a company's capitalization
structure. The two are popular metrics: the debt ratio (total debt to total assets) and the debt-to-
equity (D/E) ratio (total debt to total shareholders' equity).

Through two-year period, NKG kept issue more shares for dividend payment and bonus
share issue to increase the assets while kept the liability low. This led to the reduction of D/E
ratio. In 2020, NKG decided to pay the final dividend of 2020 at the rate of 7% in shares. In
addition, the Company decided a plan to bonus shares at the rate of 13%. The total dividend and
bonus ratio is 20% in shares. NKG invested in a new centralized warehouse and relocated the
NAM KIM’S FINANCIAL ANALYSIS 19

steel pipe workshop with a scale of 4 hectares to maximize the capacity of the plating plants to
meet the growing demand in the coming time. This is a necessary job for NKG to return to the
growth period after restructuring production, transferring Nam Kim factory #1 (with a capacity
of 500,000 tons/year) and contributed capital at Nam Kim Corea to reduce debt in 2019.

V. Market performance

Market performance ratios comprised of two indicators EPS and P/E which had reverse
relationship in the period from 2019 to 2021. Specially, as the result of good financial result with
tremendous growth of net profit, EPS of NKG went up accordingly from VND 260 in 2019 and
VND 1,669 in 2020 and VND11,730 in 2021.On the other hand, P/E of NKG had a downstream
of decreasing from 26.53 in 2019 to 3.3 in 2021, respectively.
NAM KIM’S FINANCIAL ANALYSIS 20

PART D: CONCLUSIONS AND RECOMMENDATIONS

I. Business Result summary from Y.2019-Y.2021

NAM KIM’S FINANCIAL ANALYSIS 21
NAM KIM’S FINANCIAL ANALYSIS 22

- Total consumption of coated steel sheet in 2021 reach 933 thousand tons (+165%
YoY), of which domestic consumption reach 201 thousand tons (+74% YoY) and
export will reach 732 thousand tons (248% YoY).
- Total steel pipe consumption in 2021 reach 147 thousand tons (+104% YoY), all of
which is domestic consumption.
- The market share of galvanized steel and coated products in 2021 will reach
17.4%.
- Net revenue in 2021 reached VND 28,206 billion (+244% YoY), exceeding the plan
by 176.3%
- Gross profit reached VND 4,259 billion (+490% YoY) and profit after tax reached
VND 2,225 billion (+753.7% YoY), 207.9% higher than the plan.
- Gross profit margin reaches 15.1% (2020: 7.5%) and net profit margin reaches 7.9%
(2020: 2.6%).
- ROE reached 38.9% (2020: 9.3%) and ROA reached 14.5% (2020: 3.9%).
- Total assets reached VND 15,382 billion (+203.9% YoY).

II. Conclusions
Regarding to the statistical summary of Income statement, Balance sheet and Ratios of NKG
company for year 2018 to year 2021, it showed that NKG has an out performance and show
stable growth year by year. It is because some of reason below:

 The price of finished steel has increased 37% from the bottom in April 2020. Therefore,
the gross margin is also increased. While NKG has a big inventory with the very cheap
purchase price.
 The increase in revenue is due to the company supporting domestic and export sales
channels
 NKG has succeeded to export the steel pipe production and export market.
 Profit increased due to increased production output, which reduced production costs,
increased gross profit margin, and increased net profit.
NAM KIM’S FINANCIAL ANALYSIS 23

1. Industry overview of 2022

 To support the enterprises recovering from COVID-19 pandemic, the Vietnam
government published the guidance to assist the production and business activities. In
addition, the representative of the Vietnam Steel Association expressed that the steel
industry, particularly Viet Nam's still market, will develop stronger in 2022 thanks to
Resolution 01/NQ-CP, issued on January 9, 2022.

 Regarding the abroad market, according to the forecast of VCBS, China will continue
to reduce export. Therefore, the countries that import steel from China will need to
find other suppliers which will become good opportunities for Vietnam to increase its
export activities.

 In Europe, the demand has increased suddenly in the last few years. The current
countries that are exporting to Europe may not cover the demand because of limited
quotas to export in a short time. It also becomes an opportunity for Vietnam in the
European market.

 In the US, the government approved an infrastructure investment package which

causes the demand raise for steel in 2022. Again, Vietnam will have the advantage to
promote export in this market.

 In India, the government has just announced an infrastructure investment package

worth 1.350 billion USD. Same to the US, this market will potentially become the
export market of Vietnam shortly.

 The demand will be increased because most the countries over the world have
recovered after the covid-19. Therefore, they will boost public investment and
infrastructure, the facilities to improve the economy. Steel is seen as a mandatory
sector and has an effective impact on the other sectors such as construction, real
estate and so on.

 Vietnam’s steel demand is projected to continue to show stable growth since the
Vietnamese economy is growing rapidly and the government is actively investing in
the construction of infrastructure and housing.
NAM KIM’S FINANCIAL ANALYSIS 24

2. SWOT analysis

NAM KIM STEEL SWOT ANALYSIS

S W O T
NAM KIM’S FINANCIAL ANALYSIS 25

a) Strength
 The price of raw materials will continue to be high.
 Gross profit margins will improve in 2022 due to unchanged selling price, but
production costs will decrease as iron ore and coal prices are forecast to graduately
decrease as China’s output shrinks.
 The upper segment in value chain of HRC (container and galvanized sheet) will help to
increase gross profit margins.
 The domestic market will recover and investment projects in factories from enterprises
will promote the growth of galvanized steel consumption.
 Inventory at the end of the first quarter of 2022 is at 8500 billion, equivalent to the end
of 2021 and this quantity is enough to meet production and business needs within the
next 1 quarter.
 The current export contract has been signed until the end of July 2022.
b) Weakness
 Over dependence on the iron ore of China and some big countries.
 Capital is limited so mainly loan from bank (high cost of capital).
 Technology is still outdated so the production cost if highly higher Functional issues.
 From 2022, Nam Kim will no longer be entitled to a tax deduction. Therefore, the net
profit will be impacted consequently.
c) Opportunities
 In 2022, the steel industry should maintain its positive position, based on the
following:
 HRC price is expected to remain high, due to trade tensions between China and
Australia, putting pressure on the supply of iron ore.
 Global production output is expected to recover from 2021.
 Domestic steel production will improve alongside the recovery of the real estate
industry.
 An expected decline in interest rates should result in decreased debt/equity ratios.
 Global production output is expected to recover from 2020-2021.
 HRC is still high due to trade tension between China and Australia, Russia vs Ukraine.
 Expected decline in interest rate leading to Decreasing Debt/ Equity ratio.
NAM KIM’S FINANCIAL ANALYSIS 26

 Boosting the public investment after recovering the Covid-19.

 Massive global demand.
d) Threat
 Finished product prices have formed at a high level, affecting consumption volume.
 Exports in 2022 may not reach a high proportion as in 2021 (68%). According to the
plan, the proportion of export will range from 55%-60% and domestic from 40%-45%.
However, it is possible to flexibly adjust the proportion according to the situation of
the market.
 Tightened public investment plans will have little impact on businesses due to the
specificity of products serving the personal consumption segment and enterprise's
factory construction projects. The biggest influence at the moment is that steel prices
are anchored at a relatively high level, which will hinder the implementation of
personal use goals as well as factory construction projects of enterprises in the market.
 China is under blockade due to the pandemic disrupting HRC supply, but Nam Kim's
imported raw materials from this country account for a small proportion and up to now,
it is still proceeding very normally.
 The Government regulation Anti-dumping tax on steel Export from VN.
 Steel import tax was reduced to zero percent leading to increasing pressure for
domestic steel enterprise. Environmental, socialize, governance regulation. (ESG).
 Exchange Rate.

3. Group Suggestions and recommendations for NKG company in 2022

 NKG company should continue to research breakthrough new alloy plating products to
explore new segments in domestic and international markets.
 NKG company should diversify export markets, focusing on European, North American,
and Australian markets with high quality product lines.
 Consolidate the entire management apparatus to help improve production and business
efficiency.
 Consistency of inventory management policy, develop raw material market scenarios to
control risks due to price fluctuations.
 Develop an effective inventory rotation policy to save financial costs and control risks.
 Focus on and manage capital and interest expenses effectively.
NAM KIM’S FINANCIAL ANALYSIS 27

DISCLAIMER

This report is designed to provide updated information about NKG, HPG and the steel
market. The written exerts their best efforts to analysis information available from various
sources, including information pertaining to horizontal analysis and ratio analysis. All
information stated in the report has been collected and assessed as carefully as possible.

It must be stressed that all opinions, judgments, estimations, and projections in this report
represent independent views of the analyst for reporters’ assignment. Therefore, this report
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NAM KIM’S FINANCIAL ANALYSIS 28

REFERENCES

 Audited Financial Statements of NKG for the financial year ended 31 December 2019, 31
December 2020 and 31 December 2022
 Audited Financial Statements of HPG for the financial year ended 31 December 2019, 31
December 2020 and 31 December 2022
 Hoa Phat Group homepage - https://www.hoaphat.com.vn/en
 Industry - General Statistics Office of Vietnam - https://www.gso.gov.vn
 Industry Outlook Q4/2021- Steel Industry report (VCBS)
https://www.vcbs.com.vn/en/Communication/GetReport?reportId=9127
 Market Data - London Metal Exchange - https://www.lme.com/en/
 Nam Kim Steel Joint Stock Company homepage - https://tonnamkim.com/?lang=en
 Steel industry expects rosy outlook for 2022 | Business | Vietnam+ (VietnamPlus)
https://en.vietnamplus.vn/steel-industry-expects-rosy-outlook-for-
2022/220947.vnp
 TradingView https://www.tradingview.com/symbols/COMEX-HRC1!/
 Vietnam’s steel industry outlook 2022 (vietnamcredit.com.vn)
https://vietnamcredit.com.vn/news/vietnams-steel-industry-outlook-2022_14639
 Vietnam’s steel industry outlook 2021 report (Mirae Asset)
https://masvn.com/api/attachment/file/1611284871664-ENG-Steel-
Industry_Update_Overweight_MAS_20201222VN_ed_S.pdf
 Weygandt, J. (2018). Financial and Managerial Accounting, 3rd Edition. John Wiley and
Sons.