INTERNATIONAL UNIVERSITY

VNU – HCMC

SCHOOL OF ECONOMICS, FINANCE, AND ACCOUNTING

SUBMISSION COVER SHEET

BUSINESS ANALYSIS & VALUATION

COMPANY RESEARCH PROJECT

Course Coordinator: Dr. NGUYEN CANH TIEN

Target firm: Hoa Binh Construction Group JSC (HBC)

Group Members:

Student ID Full Name Signatures Contribution

BAFNIU20403 TRAN MINH QUANG 100%

BAFNIU20235 LA NGUYEN NGOC ANH 100%

BAFNIU18294 NGUYEN BICH NGOC 100%

BAFNIU18294 NGUYEN DUC MINH 100%

We declare that this assessment item is the own work of our group, except where acknowledgement, and has
not been submitted for academic credit elsewhere.
Signed: ………………………………………. Date: ……………………………………………
 Hoa Binh Construction Group JSC
Industrial Sector - Construction Industry

Highlights

RECOMMEND BUY

Date: Dec 31st, Exchange:

2020 HOSE

Market Profile

Closing Price 7,870

52-week High/low 10,900/6,500

Our analysis leads us to recommend a BUY for Hoa Binh Construction
Avg. Volume 1,940,649 Group Joint Stock Company (HBC) at a target price of VND12,189 per share. This
represents a potential upside of 55% from its closing price of VND7,870 on
Market Capt. 2,113.57
December 29, 2023.
Beta 0.83
The basis for our recommendation is primarily influenced by:
Trailing EPS 1.965 • Market Competition: HBC holds the top position in the construction industry
in Vietnam as the largest listed company. Due to the recent economic downturn,
Trailing BVPS 544
numerous construction firms have been forced to close their doors. This has
presented HBC with a valuable opportunity to expand its market share. With our
impressive reputation, extensive experience, and cutting-edge technology, HBC has
established itself as the clear leader in the local market, consistently winning 70%
of bidding competitions. When compared to its international competitors, the
company possesses a significant cost advantage due to its robust supplier network
and lower overhead expenses. During the period from 2019 to 2023, HBC
experienced an 8.56% compound annual growth rate in revenue, surpassing the
industry's growth rate by a significant margin.
• Positive Outlook: The next four years hold promising growth prospects for HBC,

thanks to the recent development of Vietnam's economy and the cyclical recovery
of the construction industry. With HBC's increasing handling capacity and ongoing
cost reduction efforts, we anticipate significant growth in both total revenue and
earnings.
• Favorable Financial Position: Due to robust earnings growth, effective

management of working capital, and naturally low capital expenditures, HBC is

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 projected to have a significant amount of free cash flow. Over the past years, the
ROE ratio has been stable in the period from 2019 to 2021 at 2.36%, but post-
COVID has affected the company, recording negative levels in 2 years, 2022 and
2023.
• Key Risks: Given the nature of the construction industry, HBC faces a substantial

risk that is closely tied to economic cycles. In addition, it is important to consider

the potential risks associated with customer default and the highly competitive
nature of the market. Considering the market risks, the decrease in interest rates will
have a negative impact on HBC's earnings due to the company's significant amount
of cash deposited in banks and the resulting decrease in interest income.
• Valuation: Our valuation methods consist of discounted cash flow and relative

multiples. Based on the company's favorable fundamentals, the valuation result

suggests that HBC has an intrinsic value of VND12,189 per share, which presents
a reasonable upside of 55%.

BUSINESS DESCRIPTION

Business overview
Hoa Binh Construction Group Joint Stock Company (HBC) is one of the leading
construction companies in Vietnam, standing out with its diversity in products and
services provided. HBC provides three main products to the market, belonging to
different industries and making important contributions to the company's total
revenue.
Civil and industrial construction: This is HBC's main field, including the
construction of residential buildings, office buildings, commercial areas, and industrial
factories. This industry accounts for about 70% of HBC's revenue, which is a solid
Figure 1: HBC's revenue allocation in
recent foundation for the company's development.
Real estate: HBC also participates in real estate development, including investment,
construction, and sales of housing projects, urban areas, and commercial centers. The
real estate industry contributes about 20% to HBC's total revenue, demonstrating the
diversification of revenue sources and the company's long-term development strategy.
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 Construction materials: Besides construction and real estate, HBC also produces and
supplies construction materials, including concrete and other construction materials.
This segment accounts for about 10% of HBC's revenue, supporting and
supplementing the company's main construction activities.
HBC's competitive edge is based on its solid financial basis, diverse supplier networks,
and extensive construction expertise. HBC is the first Vietnamese construction
contractor to have won "National Brand" eight times in a row, with investments in
machinery and equipment totaling up to 1,746 billion VND. In 2006, Hoa Binh Shares
(HBC) was officially listed on the HCM Stock Exchange (HOSE).
Value chain
Hoa Binh Construction Group, Inc. (HBC) is one of the leading construction
companies in Vietnam, with a well-established value chain that encompasses input
sourcing, design, bidding, building, and output delivery. This comprehensive approach
allows HBC to provide end-to-end solutions for its clients and maintain a competitive
edge in the industry. Let's take a closer look at each component of HBC's value chain.
Input
HBC has developed a robust network of suppliers for raw materials, equipment, and
labor. The company sources high-quality construction materials such as cement, steel,
and aggregates from trusted vendors, ensuring a steady supply at competitive prices.
HBC also invests in state-of-the-art construction equipment and machinery, which
enables it to undertake complex projects and deliver superior results. Additionally, the
company has a skilled workforce, including engineers, technicians, and laborers, who
are trained to meet the highest standards of workmanship and safety.
Design
HBC has an in-house design team consisting of experienced architects and engineers
who work closely with clients to develop customized solutions that meet their specific
needs. The team uses advanced software tools such as Building Information Modeling
(BIM) to create detailed 3D models of projects, which helps in optimizing design,
reducing errors, and improving collaboration among stakeholders. HBC's design
capabilities range from conceptual design to detailed engineering, enabling the
company to handle projects of varying scales and complexities.
Bidding
HBC has a dedicated bidding department that actively participates in tenders for public
and private sector projects. The team carefully evaluates each opportunity, considering
factors such as project scope, client requirements, competition, and profitability.
HBC's strong track record, financial stability, and technical expertise give it a
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 competitive advantage in winning bids. The company also leverages its relationships
with key stakeholders, such as government agencies and industry associations, to stay
informed about upcoming projects and secure contracts.
Building
HBC's construction process is driven by a focus on quality, safety, and efficiency. The
company follows strict quality control procedures to ensure that all work is carried out
according to the highest standards. HBC also places a strong emphasis on safety, with
regular training programs for workers and strict adherence to safety protocols on all
project sites. The company uses lean construction techniques, such as Just-in-Time
(JIT) material delivery and prefabrication, to minimize waste and improve
productivity. HBC also employs advanced project management tools to monitor
progress, control costs, and ensure timely completion of projects.
Output
HBC's output consists of high-quality construction projects that meet or exceed client
expectations. The company has a diverse portfolio of completed projects, including
residential buildings, commercial complexes, industrial facilities, and infrastructure
works. HBC's projects are known for their superior design, functionality, and
durability. The company also provides post-construction services such as maintenance
and repair, which helps in building long-term relationships with clients. HBC's strong
brand reputation and customer satisfaction have earned it a loyal client base and a
steady stream of repeat business.
In addition to these core components, HBC's value chain is supported by several key
enablers. The company has a strong financial position, with adequate working capital
and access to funding sources, which allows it to take on large-scale projects and invest
in growth opportunities. HBC also has a robust risk management framework, which
helps in identifying and mitigating potential risks related to projects, suppliers, and
market conditions. The company's management team consists of experienced
professionals who provide strategic direction and ensure that all operations are aligned
with the company's goals and values.
Business segments
Hoa Binh Construction Group operates across several key business segments, each
contributing to its overall growth and market presence. The core segment, civil and
industrial construction, constitutes about 70% of the company's total revenue, with
notable projects like Landmark 81 and The Peak Midtown solidifying Hoa Binh's
leading market position compared to competitors like Coteccons and Delta.
Infrastructure construction, accounting for around 15% of revenue, includes critical
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 projects such as overpasses, water systems, and urban development initiatives. In
2023, Hoa Binh completed over 50 infrastructure projects, demonstrating steady
performance despite a smaller market share relative to specialized firms like Cienco4.
The EPC (Engineering, Procurement, and Construction) services segment,
contributing 10% of revenue, showcased Hoa Binh's comprehensive project
management capabilities, completing over 20 projects in 2023 and standing out against
competitors like Vinaconex and FLC through advanced technology adoption and
efficient cost management. Real estate investment, although only about 5% of total
revenue, plays a strategic role in long-term growth, with significant developments in
Ho Chi Minh City and Da Nang enhancing the company's footprint and providing
stable income streams. International construction, also around 5% of revenue, reflects
Hoa Binh's successful market expansion into countries such as Malaysia, Myanmar,
Kuwait, and Japan, leveraging its experience and reputation to compete favorably
against regional construction firms. This diversified business strategy not only ensures
financial stability but also positions Hoa Binh for sustainable growth, with significant
market shares in core segments and promising international ventures.
Achievements
Hoa Binh Construction Group has garnered numerous achievements that underscore
its industry leadership and commitment to excellence. The company has been
consistently recognized with prestigious awards, including the "Vietnam Value" award
for several consecutive years, highlighting its brand strength and quality. Hoa Binh's
inclusion in the "Top 10 Reputable Construction Companies" in Vietnam further
cements its status in the industry. Internationally, the company has received accolades
for projects in Malaysia and Myanmar, demonstrating its capability to meet global
standards. Noteworthy projects such as Landmark 81, one of the tallest buildings in
Southeast Asia, and the efficient completion of large-scale infrastructure like the
Duyen Hai 3 Thermal Power Plant, showcase Hoa Binh's technical proficiency and
project management excellence. These achievements reflect the company’s dedication
to innovation, sustainability, and continuous improvement, establishing it as a trusted
partner in both domestic and international markets.
Company Strategies
During the period of 2019 to 2023, Hoa Binh Construction Group executed a range of
strategies aimed at enhancing its standing in the construction sector and venturing into
global markets. HBC implemented strong financial strategies, such as utilizing private
placements to generate funds, strengthening its financial standing, and guaranteeing

6
 sufficient liquidity for upcoming development initiatives. The company concurrently
pursued and formed strategic alliances with international investors, successfully
drawing substantial investments, particularly from an Australian partner with a keen
interest in investing an amount ranging from USD 60-100 million.
Enhancing operational efficiency
HBC prioritized enhancing operational efficiency by implementing superior project
management techniques and exercising stringent cost control measures to sustain a
competitive advantage in a volatile market. The company made strategic investments
in cutting-edge construction technologies and implemented sustainable practices in
order to satisfy the increasing need for environmentally-friendly development
projects, thereby minimizing its ecological footprint.
Expanding into global
HBC placed significant strategic emphasis on expanding into international markets.
Although faced with obstacles in accessing international markets, the company
achieved notable advancements, specifically in obtaining contracts for five social
housing initiatives in Kenya valued at USD 72 million. HBC is currently conducting
research and developing additional international projects, including the Crystal Resort
in Vanuatu and the Maya Maya Hospital in Congo.
Market Overview
Hoa Binh Construction Group operates within a highly competitive and dynamic
market, characterized by rapid urbanization and significant infrastructure development
in Vietnam and across the Southeast Asian region. The Vietnamese construction
market, valued at over USD 57 billion in 2023, presents ample opportunities driven by
government initiatives in housing, transportation, and industrial projects. Despite the
competitive landscape with major players like Coteccons, Vinaconex, and Delta, Hoa
Binh has maintained a strong market position through its comprehensive service
offerings and strategic diversification. The company's international ventures further
enhance its market presence, capitalizing on the growing demand for high-quality
construction in emerging markets. By leveraging its technical expertise, robust project
management capabilities, and reputation for delivering complex projects on time and
within budget, Hoa Binh continues to capture significant market share and drive
sustainable growth in both domestic and international arenas.

INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING

Industry overview

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 The Vietnamese construction industry is showing positive signs of recovery and is
expected to enter a new growth cycle in 2024. According to a survey by Vietnam
Report JSC, up to 52.6% of construction enterprises are optimistic about the industry's
prospects this year, while only 10.5% are more pessimistic compared to 2023.
Construction demand is expected to increase due to many supporting factors such
as the recovery and stability of the macroeconomic situation, the assurance of major
balances, the real estate market overcoming its most difficult period, and the removal
of legal obstacles. In addition, the 15% growth in lending capital in 2024 as well as
the cooling down of interest rates will help reduce the burden of capital costs and
improve profits for construction enterprises.
Public investment, especially in transportation, continues to be the most important
driver of the construction industry. In 2024, the Government will spend VND 677,349
billion on public investment (of which VND 422,000 billion will be for transportation
infrastructure) and strive to disburse over 95%. This investment plan opens up huge
opportunities for infrastructure contractors, including many leading construction
enterprises (MOC, 2024).
The wave of FDI pouring into Vietnam will also boost demand for industrial
construction. In 2023, FDI disbursement in Vietnam reached a record high of USD
23.18 billion. Disbursement in the first 2 months of 2024 is estimated at USD 2.8
billion, up 9.8% over the same period, the highest level in the last 5 years.
Some large construction enterprises such as Coteccons, Hoa Binh, CIENCO4... have
accumulated effective financial management capabilities, reviewed cost cutting
measures, built brand reputation as well as applied digital transformation in their
operations. This will be a solid foundation for these businesses to take advantage of
market opportunities and create breakthroughs in 2024.
Growth Amidst Rising Urban Demand
The General Statistics Office has reported that Vietnam's GDP witnessed a 5.05%
increase in 2023. Furthermore, based on the predictions made by the International
Monetary Fund (IMF), it is anticipated that the GDP growth rate will reach 5.8% by
2029. Additionally, the Ministry of Construction has revealed that the urban
population proportion exceeded 40% in 2023 and is expected to rise to 45% by 2030.
Consequently, this surge in population concentration is likely to generate a substantial
demand for housing units in major cities and industrial zones. As a result, the
residential construction sector is expected to experience continuous growth,
contributing to the overall expansion of the construction market.
Government plans to develop Infrastructure driving the Construction Market:
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 The Government aims to achieve an urbanization rate of over 50% by 2030, with the
ratio of urban construction land to total natural land area ranging from 1.9% to 2.3%.
Additionally, the Government has also embraced a comprehensive road development
plan for Vietnam until 2030. This plan entails the construction of a substantial network
of expressways, national highways, and coastal roads, which will effectively connect
various cities and provinces across the country.
Competitive analysis positioning
HBC has established a strong presence in the Vietnamese construction market, earning
a reputation as a top contractor that excels in delivering impressive projects on a large
scale with exceptional quality. The company provides a diverse array of services,
encompassing civil and industrial construction, infrastructure development, real estate,
and property management. HBC's portfolio encompasses a diverse range of projects
spanning residential, commercial, healthcare, and hospitality sectors. In order to
enhance its competitiveness, HBC has implemented a number of significant initiatives:
Strengthening Finances: HBC has taken proactive measures to raise capital and
enhance its financial position. In 2023, the company had a private placement of 274
million shares, which was projected to generate around VND 3.29 trillion in funds.
Our aim is to provide additional funding for business operations, debt repayment, and
new development projects, thereby ensuring a strong financial position and ample
liquidity.
Strategic Partnerships: HBC has managed to generate substantial interest from
investors on a global scale through strategic partnerships. It is worth mentioning that
a partner from Australia has expressed interest in investing a substantial amount,
ranging from $60-100 million, in HBC shares. This demonstrates a high level of
foreign confidence in the company's potential for growth.
Operational Efficiency: In order to thrive in a fiercely competitive market, HBC has
made significant efforts to improve its operational efficiency. Efficient project
management and cost control are essential in an industry where pricing and
profitability can fluctuate unpredictably.
Innovation and Sustainability: HBC is making strategic investments in cutting-edge
construction technologies and sustainable practices to set itself apart from its
competitors. With a keen eye on cutting-edge technologies and a strong commitment
to eco-friendly building practices, HBC is dedicated to satisfying the increasing need
for sustainable development projects.
Market Expansion: Despite the obstacles encountered amidst the COVID-19
pandemic, HBC perseveres in broadening its market presence on a domestic and global
9
 scale. The company's ability to withstand challenges and adjust to new circumstances
has enabled it to secure fresh projects and maintain a consistent flow of work.

PORTER FIVE FORCES

Threat of New Entrants: Moderate

Hoa Binh Corporation operates in the construction industry, characterized by moderate

barriers to entry. The threat of new entrants is influenced by various factors such as
economies of scale, brand reputation, regulatory barriers, and access to distribution
channels. Hoa Binh benefits from economies of scale, given its established presence
and operational efficiency, making it challenging for new entrants to match its
capabilities. Moreover, the construction sector often requires substantial initial capital
investment in equipment, skilled labor, and technology, acting as a barrier to entry.
Additionally, the company's strong brand reputation and extensive portfolio of
completed projects enhance customer trust and loyalty, making it difficult for new
competitors to gain traction. Regulatory hurdles, including licensing requirements,
safety standards, and environmental regulations, further deter potential entrants,
particularly those lacking the expertise and resources to navigate complex compliance
frameworks.
Bargaining Power of Suppliers: Moderate
Suppliers play a critical role in the construction industry, providing raw materials,
equipment, and skilled labor essential for project execution. Hoa Binh Corporation's
bargaining power with suppliers depends on factors such as the availability of
alternative sources, supplier concentration, and the strategic importance of inputs.
While the construction sector typically features numerous suppliers, certain materials
or equipment may have limited substitutes, granting suppliers some bargaining power.
To mitigate this risk, Hoa Binh employs strategies such as vertical integration, supplier
diversification, and long-term contracts to secure favorable pricing and ensure a stable
supply chain. Furthermore, the company invests in supplier relationship management
initiatives to foster collaboration, innovation, and mutual value creation, thereby
strengthening its position vis-à-vis suppliers.
Bargaining Power of Buyers: Medium -> High
Buyers in the construction industry, including property developers, governments, and
private clients, wield varying degrees of bargaining power depending on market
conditions, project specifications, and competitive dynamics. Hoa Binh Corporation's
bargaining power with buyers is influenced by factors such as project complexity,
brand reputation, and relationship strength. While buyers may negotiate terms, pricing,
10
 and project timelines, HoaBinh's track record of delivering high-quality projects on
schedule and within budget enhances its credibility and bargaining position. Moreover,
the company cultivates long-term partnerships with key clients, offering value-added
services, innovative solutions, and personalized support to differentiate itself from
competitors and reduce price sensitivity.
Threat of Substitutes: Moderate
Substitutes in the construction industry encompass alternative building materials,
construction methods, and project delivery models that could potentially displace
traditional practices. Hoa Binh Corporation faces the threat of substitutes from
emerging technologies, modular construction techniques, and prefabricated
components, which offer cost savings, speed, and sustainability benefits. To address
this challenge, the company invests in research and development, innovation, and
process optimization to enhance efficiency, quality, and project delivery speed.
Furthermore, Hoa Binh leverages its expertise in complex, bespoke projects,
customization capabilities, and reputation for craftsmanship to differentiate itself from
substitute solutions and retain its competitive edge.
Competitive Rivalry: High
Competition in the construction industry is fierce, with numerous firms competing for
projects, market share, and talent. Hoa Binh Corporation faces rivalry from both
domestic and international construction companies, each vying for lucrative contracts
and prestigious projects. Competitive factors include pricing, project management
capabilities, technological innovation, and brand reputation. Hoa Binh distinguishes
itself through its focus on quality, safety, and sustainability, backed by a track record
of successful project delivery and client satisfaction. Furthermore, the company fosters
a culture of continuous improvement, employee development, and collaboration to
strengthen its competitive position and adapt to evolving market dynamics.

FINANCIAL ANALYSIS
Profitability

The Gross Profit Margin experienced a slight increase from 2018 to 2019, but it
significantly decreased in 2020. This decline suggests a potential decrease in
efficiency or profitability in the company’s business operations.
On the other hand, the SG&A to Sales ratio consistently increased each year, with a
substantial jump in 2020. This upward trend indicates that HBC's selling, general, and
Figure 2: Profitability of HBC from administrative expenses grew significantly faster than its sales revenue. This could be
2019 to 2023

11
 due to factors such as higher marketing and advertising costs, increased administrative
personnel costs, or other overhead expenses that outpaced revenue growth.
ROA and ROE Analysis
In 2020, the company’s ROE stood at 2%, which is positive. By 2021, there was a
slight increase to 2.36%, still a positive point. However, the trend took a sharp turn in
2022 and 2023, with negative ROE values significantly reduced. This sharp decline
can be attributed to significant revenue volatility, increasing debt levels leading to
higher interest expenses, and rising operating costs. Additionally, the company's
Figure 3: ROE and ROA of HBC from struggle to maintain profit margins amidst fluctuating market conditions and the
2020 to 2023
economic impact of the COVID-19 pandemic further exacerbated the negative trend
in ROE.
Additionally, the Return on Assets (ROA) reflects how effectively a company utilizes
its assets to generate profits. In 2020 and 2021, the ROA values remained relatively
stable. However, the sharp downturn in 2022 and 2023 also indicates that the company
struggled with inefficient asset utilization, possibly due to poor management
decisions, operational inefficiencies. Additionally, the company's inability to adapt to
market changes and the lingering effects of the COVID-19 pandemic likely
contributed to the negative ROA, as the assets were not generating sufficient returns
to cover expenses and debt obligations.
Current and Quick Ratio Trends Indicating Liquidity Challenges
The Current Ratio measures a company’s ability to cover short-term debts using its
current assets. From 2019 to 2020, it increased, indicating improved short-term
liquidity. However, it slightly declined in 2021 and further decreased in 2022. This
suggests that the company may face challenges in meeting its short-term obligations.
On the other hand, the Quick Ratio (also known as the acid-test ratio) excludes
Figure 4: Liquidity Ratio of HBC from
inventory from current assets, focusing only on highly liquid assets. It rose from 2019
2019 to 2023
to 2020, indicating better short-term liquidity. However, it gradually decreased in 2021
and significantly dropped in 2022. The declining quick ratio suggests potential
liquidity issues, as the company may struggle to meet short-term obligations without
relying on inventory sales.
The fluctuation in the Debt-to-Equity (D/E) ratio of the company raised serious
concerns regarding financial stability.
The ratio started at a high level in 2019 and saw a significant peak in 2023, indicating
a heavy reliance on debt financing which poses a heightened financial risk and
potential insolvency threats. The sharp spikes observed, especially in 2022 and 2023,

12Debt/Equity Ratio of HBC from

Figure 5:
2019 to 2023
 could be attributed to extensive borrowing or a substantial decrease in equity, signaling
a need for immediate action to address these issues and enhance the company's long-
term sustainability.

VALUATION

Target price for HBC is VND 13.947

Based on our analysis using the Discounted Cash Flow model. This takes into
consideration the company's growth potential driven by key business factors. With the
price at VND 7870 as of September 29, 2023, our analysis suggests a one-year target
price of VND 13.947. Therefore, our team recommends either a BUY position for
HBC stock.
Discounted Free Cash flow Valuation ( DFCF )
After evaluating HBC, we have calculated the implied share price of VND using the
Free Cash Flow to Firm (FCFF) method. The following factors are relevant to this
specific valuation approach.

Revenue
Based on the information provided about HBC's strong market position and market
expansion plans, it seems reasonable to expect relatively strong sales growth for the
company over the period from 2024 to 2028.
1. Short-term (2024-2025): Sales growth rate could be in the range of 10-15%
annually. This increase is driven by a gradual recovery in the construction sector post-
Figure 6: Net Revenue of HBC from COVID-19, increased government spending on infrastructure projects. Therefore, the
2019 to 2028
average rate 12,5% is used to estimate when the company leverages its capital raise,
new partnerships, and operational improvements to secure more projects.
2. Medium-term (2026-2027): Assuming steady growth in the Vietnamese
construction market, and no major economic disruptions and successful execution of
key projects and expansion into new markets within Vietnam of HBC's strategies, sales
growth could accelerate to 15-20% per year. Besides, innovations to leverage its strong
reputation and expand its project portfolio, including high-value contracts and
partnerships may help HBC gain market share.
Figure 7: Net Revenue of HBC from
3. Longer-term (2028): Growth may start moderating but could still be in the range
2024F to 2028F
of 12-18%. This more conservative growth rate accounts for potential market
saturation and increased competition. However, it needs to consider HBC’s strategic
investments in technology and project management, which are expected to enhance
efficiency and profitability. These revenue projections are underpinned by HBC's
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 strong market position, robust project pipeline, and proactive management strategies
aimed at sustaining long-term growth as HBC establishes itself as a leading player
domestically and potentially expands more internationally.
Capital expenditure
According to the company's policy in the near future, HBC will increase capital
mobilization from Equity to expand its business model and reduce leverage ratio, so it
is expected that HBC will deduct a part of the money from Equity for loans. This is
also shown by the company's Long-term receivables increasing from 0.5% (2019) to
2.5% (2023). However, the growth rate of Long-term receivables is quite slow and

Figure 8: Capital Expenditure of HBC

stable so the growth rate will be 5%/year.
Fixed assets declined from 2019-2023, but expect gradual investments for growth,
forecasting 2-5% annual increases. Long-term investments saw a significant jump in
2023, so projected 2-5% annual increases for potential acquisitions/expansions. Other
long-term assets have been relatively stable, hence being forecasted 2-4% yearly
growth, hence investments will focus on modernizing construction equipment,
integrating advanced technologies such as Building Information Modeling (BIM) and
automation, and expanding into international markets, including Canada, Australia,
and the US. Additionally, HBC will allocate substantial funds towards sustainable
building practices, research and development, and enhancing workforce capabilities.

WACC

The Weighted Average Cost of Capital (WACC) for HBC is calculated using the
Capital Asset Pricing Model (CAPM), which incorporates the cost of equity and the
cost of debt. The risk free rate is calculated by average monthly 10-year Vietnam
Government Bond Yield to Maturity , it arrives at around 3%. In addition, Professor
Damodaran defines Vietnam market risk premium of 4.4% at the beginning of 2024.
The beta coefficient is a result by calculating a formula with covariance of the monthly
return on the HBC stock against the daily return on the VN-Index over the last 5 years.
Besides, pre-tax cost of debt is anticipated to be 39.09% by taking interest expense and
dividing net debt.
Terminal growth rate

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 For the terminal growth rate, we used the calculation of the Sustainable Growth Rate
(SGR) by incorporating the Return on Equity (ROE) and the retention ratio. the result
growth rate approximately 2.24%. This terminal growth rate is used in the valuation
model to estimate the future value of HBC after 2028.

ESG ANALYSIS

Business environment
Towards sustainable development, Hoa Binh has always focused on green standards,
building environmentally friendly and modern buildings throughout the country. To
minimize its impact on the environment, Hoa Binh is choosing energy-saving
construction techniques and equipment as well as investing in renewable energy
sources and investing in cleaner technology to improve the efficiency of energy use
and participation in carbon offset programs.
Social
Hoa Binh's growth and success hinges on meeting its obligations to the country,
society, and community. Recognized for creating the finest workplace in the
construction sector, HBC has been among the top enterprises worthy of dedication 5
times in Vietnam. That means, Hoa Binh is like a second home for workers when it
always protects, supports and promotes the development of their own abilities. HBC
always goes hand in hand with the strong development of Vietnamese construction
companies, making small contributions to the nation's socio-economic development.
Furthermore, Hoa Binh acknowledges its duty to society and allocates a portion of its
budget for community initiatives, striving to create a more compassionate and
improved society. Through the establishment of the Le Mong Dao Education Support
Fund, Hoa Binh has invested over 15 billion VND to aid students in their academic
pursuits, emphasizing its commitment to education and knowledge dissemination.
Governance
In 2023, Hoa Binh faces many adverse impacts from the business environment, and
real estate market along with the widespread economic crisis in Southeast Asia and the
whole world. Therefore, human resource management mainly revolves around
"rearranging personnel, streamlining the apparatus" to effectively adapt to the
operating situation and actively support the comprehensive restructuring of the
enterprise.
Management Structure
The company is led by a Board of Directors, responsible for overall strategic direction
and organizational oversight. They provide guidance and control to ensure the
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 company is moving in the right direction. The Board of Directors is composed of the
Chairman - Mr. Le Viet Hai, the Vice Chairman, and many other members of the
Board of Directors.
Each member of the board of directors has an extensive range of professional expertise
and an in-depth knowledge of the company's business situation, which enables them
to work together to establish the organization's strategic direction throughout its
formation and development. All things considered, the management board plays a
crucial role in providing strategic direction, ensuring financial stability, supervision,
and responsibility for the organization, which is essential for its long-term success and
sustainability.
The day-to-day operations of HBC are managed by a team of executives, including a
Chief Executive Officer (CEO), Chief Financial Officer (CFO), and other functional
heads. The company has various departments and divisions, such as Project
Management, Procurement, Finance, and Human Resources, each with its own
management team.
Despite initial progress, issues arose within Hoa Binh's internal governance around a
dispute over the position of Chairman of the Board of Directors. These complications
have had implications for the company's operational efficiency and the interests of its
shareholders when the company's shares are listed on the stock exchange. Following
the onset of this internal controversy, there was a minor dip in the market valuation of
HBC shares on the stock market from December 31, 2022 and also affecting the
company's overall operations.
Shareholder Structure
HBC's shares are traded on the Ho Chi Minh Stock Exchange (HOSE), with a diverse
shareholder base that includes institutional and individual investors. The company's
largest shareholders are typically domestic and foreign institutional investors, as well
as the founding members and their families.
Figure 9: Shareholder structure of HBC
RISK ANALYSIS

The risk of a real estate market freeze

The decline in the real estate market led to decreased demand for construction services.
This downturn has impacted Hoa Binh's revenue as evidenced by its financial
performance in 2022. Despite recording a net revenue of VND14,122 billion ($598.83
million) in 2022, an increase of 24%, and fulfilling 80% of its target, Hoa Binh
Construction Group reported a net loss of over VND1,140 billion ($48.34 million) for
the year. This marked the first loss in the company's history, attributed to poor results
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 in the fourth quarter where it experienced a significant drop in net revenue and incurred
a gross loss of VND426 billion ($18.06 million)
The risk of fluctuations in raw material prices
Rising raw material prices, exacerbated by global political conflicts and supply chain
disruptions, contributed to increased operational costs. This situation is particularly
challenging for construction companies like Hoa Binh, which rely heavily on these
materials. Therefore, HBC managed these risks by adding terms and conditions into
construction contracts, such as price reserves to partially hedge against material price
fluctuation.
The risk of Liquidity
In comparison to other firms in the same industry, HBC's accounts receivable are much
larger. Receivables that are not collected also delayed receivables; Accounts
receivable is increasing while cash is not much. Understand that high accounts
receivable is typical of real estate and construction industries, but having high accounts
receivable with a large provision for bad debts is risky, and HBC has a high provision
for short-term bad debts, increasing the risk, which is extremely harmful to a business.
This account's significant growth indicates that the corporation is lending to higher-
risk customers.
The risk of market
Currently, construction businesses are facing many difficulties; the wave of foreign
investment is not as strong as previously expected because of the impact of the Russia-
Ukraine war. Domestic public investment has been promoted but is facing difficulties
due to price inflation. Meanwhile, private sector investment is being tightened on
credit, affecting cash flow. In particular, contractors' profits, already thin due to fierce
competition, are further eroded by price slippage.
To mitigate these effects, Hoa Binh Construction Group has adopted several strategies,
including seeking new customers and job sources, optimizing costs and construction
methods, strengthening financial and risk management, and applying technology and
innovation to achieve efficiency and minimize errors.

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 APPENDIX

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APPENDIX A: FINANCIALS
Appendix A-1: Income Statement
Appendix A-2: Statement of financial position
 Appendix A-3: Statement of cashflows

Appendix A-4: Financial Ratios

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 APPENDIX B: FORECASTING AND VALUATION
Appendix B-1: DCF Valuation ( FCFF )

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